Precious metals at three week low

Gold and silver continue to drop as dollar surges ahead

Precious metal prices went further down on Monday, 15 June, 2009. They fell as the dollar strengthened in the wake of supportive comments regarding the greenback's status as a reserve currency. Gold fell to three week lows today.

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 Monday, gold for August delivery ended at $927.5, lower by $13.2 (1.4%) an ounce on the New York Mercantile Exchange. Last week, gold ended higher by 2.3%. Year to date, gold prices are higher by 7.1%.

Gold had ended the month of May higher by 9.8%. It was the highest monthly gain registered by gold in six months. Before this, gold had suffered losses in prior two months. For the month of April and March, 2009, gold had lost 3.7% and 2.1% respectively. But the metal gained 4.3% in the first quarter of this year.

On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (10.5%) since then.

On Monday, Comex silver futures for July delivery fell 84.5 cents (5.7%) at $14.03 an ounce. Last week, silver ended lower by 3.3%. For the month of May, silver gained 26.6%. It was the biggest monthly gain for silver in more than two decades. Year to date, silver has climbed 28% this year. For 2008, silver had lost 24%.

In the currency market on Monday, the dollar index, which weighs the strength of dollar against the basket of six other currencies, went up by 1.5% earlier during the day but ended higher by 0.9%. Dollar gained in the wake of supportive comments regarding the greenback's status as a reserve currency from a Russian official ahead of a meeting of BRIC nations.

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

At the MCX, gold prices for August delivery closed lower by Rs 77 (0.53%) at Rs 14,403 per 10 grams. Prices rose to a high of Rs 14,500 per 10 grams and fell to a low of Rs 14,381 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 792 (3.4%) lower at Rs 22,524/Kg. Prices opened at Rs 23,300/kg and fell to a low of Rs 22,451/Kg during the day's trading.