Bullion metals add more glaze

Prices rise as dollar drops further on credit rating concerns

Precious metals ended higher on Friday, 22 May, 2009 at Comex. The subdued dollar increased the appeal of precious metals as a safe haven for alternative investment thereby taking them higher. The dollar fell further on US's credit rating worries.

Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.

On Friday, Comex Gold for June delivery gained $7.7 (0.8%) to close at $958.9 an ounce on the New York Mercantile Exchange. Earlier during the day, it rose to a high of $963.1. For the week, gold ended higher by 3%. Year to date, gold prices are higher by 10.3%.

For the month of April, gold had lost 3.7%, the second consecutive monthly drop. For the month of March, gold fell 2.1%, down for the first month in five. But the metal gained 4.3% in the first quarter. Before March, for the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%.

On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (8%) since then.

On Friday, Comex silver futures for July delivery gained 25 cents (1.7%) at $14.695 an ounce. Year to date, silver has climbed 29% this year. For 2008, silver had lost 24%.

In the currency market on Friday, the U.S. dollar index, fell 0.9%. The greenback fell to the lowest level this year against the euro as worries increased that the U.S. could lose its triple-A credit rating.

Earlier during the week, the World Gold Council reported that gold investment demand in the first quarter more than tripled from a year ago to a record level as investors piled into gold exchange-traded funds to hedge against the global economic downturn.

The report detailed that investment demand totaled 595.9 metric tons in the first three months of the year, up from 171.3 metric tons a year ago. Total gold demand, however, marked a more modest increase, as jewelry and industrial consumption declined. Overall, gold consumption hit 1,015.5 metric tons in the first quarter, up 38% from a year ago.

In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.