Bullion metals shine

Gold manages modest jump while silver adds substantial glaze

Precious metals ended higher on Thursday, 28 May, 2009 at Comex. Prices ended higher as couple of encouraging economic reports hit the wires today thereby increasing inflation concerns. Economic reports on durable goods and housing – both checked in better than expected.

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 rose $8.2 (0.9%) to close at $961.5 an ounce on the New York Mercantile Exchange. Last week, gold ended higher by 3%. Year to date, gold prices are higher by 10.6%.

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 (7%) since then.

On Thursday, Comex silver futures for July delivery rose 29.5 cents (2.1%) at $15.16 an ounce. Year to date, silver has climbed 32.3% this year. For 2008, silver had lost 24%.

The Commerce Department reported on Thursday, 28 May, 2009 that U.S. new home sales rose 0.3% in April to a seasonally adjusted annual rate of 352,000. But the figure was well below the 365,000 pace expected.

In a separate report, The Commerce Department reported on Thursday, 28 May, 2009 that new orders for U.S made capital goods were much stronger than expected in April. Orders for durable goods rose 1.9% in April, pushed higher by new orders for primary metals, machinery and motor vehicles. It marked the largest gain in new orders since December 2007.

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 90 (0.61%) at Rs 14,712 per 10 grams. Prices rose to a high of Rs 14,759 per 10 grams and fell to a low of Rs 14,560 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 351 (1.51%) higher at Rs 23,516/Kg. Prices opened at Rs 23,113/kg and rose to a high of Rs 23,675/Kg during the day's trading.