Strong dollar hammers precious metal prices

Gold ends modestly lower while silver plunges

Precious metal prices fell on Monday, 17 August, 2009. Prices fell as dollar strengthened following a huge sell off in international equity market overnight. The Chinese market led the pack of decliners.

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 December delivery ended at $935.8, lower by $12.9 (1.3%) an ounce on the New York Mercantile Exchange. Last week, gold ended lower by almost 1.1%. After four consecutive weekly gains, this was yellow metal's first weekly drop. Year to date, gold prices are higher by 5.4%.

Gold ended July, 2009 higher by 2.8%. Before this, 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 (9%) since then.

On Monday, Comex silver futures for September delivery lost 74.7 cents (5%) to $13.975 an ounce. Last week, silver ended higher by 0.23%.

Silver ended 2.7% higher for July, 2009. For second quarter, silver rose 4.5%. Year to date, silver has climbed 25.5% this year. For 2008, silver had lost 24%.

In the currency market on Monday, the dollar index which weighs the value of dollar against a basket of six other currencies, rose by 0.4%.

Triggering a broad retreat in global stocks, Shanghai stocks fell 5.8% yesterday, their biggest drop this year, after persistent worries over Beijing's moves to cool economic growth added to investor caution.

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

At the MCX, gold prices for October delivery closed lower by Rs 18 (0.12%) at Rs 14,877 per 10 grams. Prices rose to a high of Rs 14,900 per 10 grams and fell to a low of Rs 14,811 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 635 (2.7%) lower at Rs 23,079/Kg. Prices opened at Rs 23,680/kg and fell to a low of Rs 22,820/Kg during the day's trading.