Bullion metals rise further

Precious metals rise as optimistic economic reports hints at higher inflation

Precious metals ended higher on Wednesday, 06 May, 2009 at Comex. Prices rose today on couple of economic reports that hinted towards more inflation ahead thereby increasing the appeal of precious metals as a safe bet for 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 Wednesday, Comex Gold for June delivery gained $6.7 (0.7%) to close at $911 an ounce on the New York Mercantile Exchange. Earlier in the day, it rose to a high of $913.5. Last week, gold ended lower by 3%. Year to date, gold prices are higher by 2.4%.

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 Wednesday, Comex silver futures for July delivery gained 29 cents (2.2%) at $13.71 an ounce. Year to date, silver has climbed 15.9% this year. For 2008, silver had lost 24%.

Among major economic reports for the day, a private sector report stated that private-sector employment fell by an estimated 491,000 jobs in April, the smallest decline in six months. In a separate report, also helping boost sentiment, the Mortgage Bankers Association reported a 2% rise last week in the count of mortgage applications, hinting that the troubled housing market could be stabilizing

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 higher by Rs 107 (0.74%) at Rs 14,486 per 10 grams. Prices rose to a high of Rs 14,532 per 10 grams and fell to a low of Rs 14,365 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 535 (2.5%) higher at Rs 22,326/Kg. Prices opened at Rs 21,869/kg and rose to a high of Rs 22,450/Kg during the day's trading.