Bullion metals end higher

Prices rise as economic data checks in weaker than expected

Precious metals ended higher on Thursday, 14 May, 2009 at Comex. Prices rose today as dollar gave up earlier gains and initial claims data checked in worse than expected increasing the appeal of bullion metals as an alternate source of investment.

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 Thursday, Comex Gold for June delivery gained $2.8 (0.3%) to close at $928.4 an ounce on the New York Mercantile Exchange. Last week, gold ended higher by 3%. Year to date, gold prices are higher by 5%.

For the month of April, gold 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 (15%) since then.

On Thursday, Comex silver futures for July delivery gained 2 cents (0.4%) at $14.04 an ounce. Year to date, silver has climbed 18.5% this year. For 2008, silver had lost 24%.

In the currency market on Thursday, the greenback pared early gains. The dollar index, which weighs the strength of dollar against the basket of six other currencies ended little lower.

Among economic reports for the day, the Labor Department reported on Thursday, 14 May, 2009, that initial jobless claims rose 32,000 to a seasonally adjusted 637,000 in the week ended 9 May, 2009. This put the number at the highest level since mid-April. As per the report, there was no sign of improvement in the U.S. labor market in the latest week as workers from Chrysler joined the ranks of the unemployed. The report also detailed that the four-week average of new claims rose by 6,000 to 630,500, also the highest level since 18 April, 2009.

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

Last year, the weakening dollar and higher global demand for raw materials had led to records for commodities including gold. Gold reached a record in March 2008 as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the last move, the Federal Reserve has cuts its target bank lending rate to 0.25% from 5.25% in September, 2007. The Fed did it in nine steps.

Prior to 2008, gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.

At the MCX, gold prices for June delivery closed lower by Rs 64 (0.42%) at Rs 14,833 per 10 grams. Prices rose to a high of Rs 14,900 per 10 grams and fell to a low of Rs 14,775 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 114 (0.5%) lower at Rs 22,827/Kg. Prices opened at Rs 22,910/kg and fell to a low of Rs 22,535/Kg during the day's trading.