Precious metals shine

Prices give up some gains but manage to end higher

Precious metal prices ended higher on Monday, 02 November, 2009. Though prices pared some of their earlier gains, they ended higher following upbeat economic reports from US and rest of the world.

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 $1,054, higher by $13.6 (1.3%) an ounce on the New York Mercantile Exchange. Earlier, it rose to a high of $1062. In October, gold had registered record highs quite a few times reaching an all time high of $1071. Year to date, gold prices are higher by 20%.

Gold ended October 2009 higher by 3.8%. For the third quarter it ended higher by 8.7%. 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 Monday, December Comex silver futures ended higher 19 cents (1.2%) at $16.44 an ounce.

Year to date, silver has climbed 55% this year. For 2008, silver had lost 24%.

The Institute for Supply Management reported on Monday, 02 November, 2009 that USA's manufacturing firms expanded at the fastest pace in more than three years in October, putting this segment of the economy on what appears to be a sustainable growth path.

The Institute for Supply Management index rose to 55.7% from 52.6% in September, well above the 53% expected. It's the highest reading since April 2006. Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting.

In a separate report, the National Association of Realtors in US reported on Monday, 02 November, 2009 that pending sales of existing homes rose a seasonally adjusted 6.1% in September, the eighth consecutive increase. Buyers were rushing to beat the expiration of an $8,000 federal tax credit for first-time buyers.

In the currency market on Monday, the dollar index, which calculates the strength of the dollar against a basket of six other currencies reversed its course after dropping earlier during the day.

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