Precious metals smile

Weak US stocks impart shine to precious metals

Precious metal prices ended higher on Tuesday, 01 September, 2009. Prices rose as US stocks dropped increasing the appeal of precious metals as a safe haven against other investment alternatives.

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 December delivery ended at $956.5, higher by $3 (0.3%) an ounce on the New York Mercantile Exchange. It rose as high as $958 earlier but also fell to $947.50. Last week, gold ended higher by almost 0.4%. Year to date, gold prices are higher by 9.1%.

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 (7%) since then.

On Tuesday, Comex silver futures for September delivery rose by 13.7 cents (0.9%) to $15.06 an ounce. Last week, silver ended higher by 4.3%.

Silver ended 7.1% higher for August, 2009. For second quarter, silver rose 4.5%. Year to date, silver has climbed 33.5% this year. For 2008, silver had lost 24%.

In the currency market on Tuesday, the dollar index, which weighs the strength of dollar, against a basket of six other currencies ended rose by 0.6%.

On Wall Street, stocks were solidly lower as the financial sector bore the brunt of bearish analyst comments and investors' concerns about a market correction that could last well into fall.

Among economic reports expected on Tuesday, The Institute for Supply Management reported on Tuesday, 01 September, 2009 that its index rose to 52.9% in August above the 50.5% expected. It was higher than the 48.9% in July. It's the highest reading since June 2007. Activity at the nation's manufacturing firms expanded for the first time in 19 months.

Readings above 50% in the ISM diffusion index indicate that more firms are growing than contracting. The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better or worse this month than last.

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 78 (0.51%) at Rs 15,203 per 10 grams. Prices rose to a high of Rs 15,218 per 10 grams and fell to a low of Rs 15,068 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 247 (1%) higher at Rs 24,492/Kg. Prices opened at Rs 24,201/kg and rose to a high of Rs 24,596/Kg during the day's trading.