Drooping dollar bolsters precious metal prices

Drop in holding for gold exchange-traded fund restrict price rise

Precious metal prices rose at USA on Wednesday, 01 July, 2009. Prices added more luster today as the dollar fell following a worse than expected employment report from a private company, a day ahead of the employment report expected from the Labor Department. But at the same, holdings in the biggest gold exchange-traded fund fell for the first session in four, restricting the rise in price.

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, gold for August delivery ended at $941.3, higher by $13.90 (1.5%) an ounce on the New York Mercantile Exchange. Last week, gold ended higher by 1%. This was the first weekly gain for the yellow metal in four weeks. Year to date, gold prices are higher by 6.4%.

For the month of June, 2009, gold ended down by 5.4%. Gold had ended the month of May higher by 9.8%. It was the highest monthly gain registered by gold in six months. For the second quarter, gold ended higher by 0.5%. The metal had 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 (8.9%) since then.

On Wednesday, Comex silver futures for July delivery rose 16.6 cents (1.2%) at $13.74 an ounce. Last week, silver ended lower by 0.5%.

Silver ended 13% down for the month of June, 2009. For the month of May, silver gained 26.6%. It was the biggest monthly gain for silver in more than two decades. For second quarter, silver rose 4.5%. Year to date, silver has climbed 21.2% this year. For 2008, silver had lost 24%.

In the currency market on Wednesday, the dollar index, a six-currency measure of the greenback's value, rose, fell by almost 0.7% on reports that U.S. private sector shed 473,000 jobs in June,2009. The report comes one day before the Labor Department reports on changes in the nation's nonfarm payrolls for June. As per the report, employment in the service-providing sector in June fell by 223,000. The goods-producing sector declined 250,000, and employment in factories dropped 146,000. The dollar index dropped by 6.4% in the second quarter and is lower by 1.5% on a y-t-d basis.

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 higher by Rs 98 (0.7%) at Rs 14,549 per 10 grams. Prices rose to a high of Rs 14,581 per 10 grams and fell to a low of Rs 14,415 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 67 (0.3%) higher at Rs 22,131/Kg. Prices opened at Rs 22,000/kg and rose to a high of Rs 22,131/Kg during the day's trading.