Precious metals add more shine

Prices rise as dollar erases earlier gains

Precious metal prices were pressured earlier during the day on Tuesday, 15 September, 2009. But then with dollar erasing its earlier gains, precious metals made a U turn and ultimately ended higher. Yellow metal prices once again climbed back above the $1,000 per ounce level.

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 Tuesday, gold for September delivery ended at $1005, higher by $5.1 (0.5%) an ounce on the New York Mercantile Exchange. The more active December contract rose $5.20, or 0.5%, to finish at $1,006.30 an ounce. Last week, gold ended higher by 1%. Year to date, gold prices are higher by 15%.

Gold ended August, 2009 higher by 0.2%. 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 (2.5%) since then.

On Tuesday, Comex silver futures for December delivery rose 37.9 cents (2.2%) to $16.98 an ounce. Last week, silver ended higher by 2.5%.

Silver ended 7.1% higher for August, 2009. For second quarter, silver rose 4.5%. Year to date, silver has climbed 46.2% this year. For 2008, silver had lost 24%.

The dollar strengthened initially today following a batch of upbeat economic reports. But then, as investors turned towards equities, dollar pared its gains. In the currency market on Tuesday, the dollar index, which measures the strength of dollar against a basket of other currencies, fell by 0.2%.

The New York Federal Reserve Bank reported on Tuesday, 15 September, 2009 that manufacturing activity in the New York area rebounded to its highest level since the recession began in late 2007. As per the report, the bank's Empire State Manufacturing index rose to 18.9 in September from 12.1 in August. This is the seventh straight increase in the index. Nearly 40% of manufacturers reported that conditions had improved in September while 20% said conditions had worsened.

In a separate report, the Commerce Department reported on Tuesday, 15 September, 2009 that U.S. retail sales rose a seasonally adjusted 2.7% in August, the biggest increase in more than three years. Market was expecting a figure around 2.3%. Sales are down 5.3% compared with a year earlier.

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 higher by Rs 86 (0.54%) at Rs 15,877 per 10 grams. Prices rose to a high of Rs 15,904 per 10 grams and fell to a low of Rs 15,695 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 538 (2%) higher at Rs 27,273/Kg. Prices opened at Rs 26,820/kg and rose to a high of Rs 27,350/Kg during the day's trading.