Precious metals lose more glitter

Prices drop again as dollar firms up after housing data

Bullion metal prices turned paler on Tuesday, 22 December 2009. Prices fell as the dollar firmed up following a batch of better than expected economic data, mainly in the housing sector.

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 February delivery ended at $1,086.7 an ounce, lower by $8.7 (0.8%) an ounce on the New York Mercantile Exchange. Yesterday, gold fell below the $1,100 level for first time in more than one and half months. Last week, gold shed 1.1%. The metal fell for three straight weeks.

Gold ended November 2009 higher by 13%. Before that, for the third quarter it ended higher by 8.7%. For the second quarter, gold ended higher by 0.5%. The metal had gained 4.3% in the first quarter of this year. On a year to date basis, gold price is higher by 24.4%.

On Tuesday, December Comex silver futures ended almost unchanged (marginally lower) at $17.03 an ounce. Last week, silver registered marginal fall. The metal has gained 51.3% this year until date.

In the currency market on Monday, the greenback started the day in the mixed mode. Then, the dollar's move caused a pullback in commodity prices. The dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.2%.

The National Association of Realtors in US reported on Tuesday, 22 December 2009 that resale of U.S. homes increased by 7.4% to 6.54 million in November, 2009.

The sales pace was the highest since February 2007 and was the third-straight large increase in existing home sales. Sales are up 28% since August. The report also stated that sales are up a record 44.1% in the past year, reflecting a recovery in the housing market after the sharpest downturn in decades.

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

At the MCX, gold prices for February delivery closed lower by Rs 264 (1.55%) at Rs 16,705 per ten grams. Prices rose to a high of Rs 17,024 per 10 grams and fell to a low of Rs 16,672 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 338 (1.23%) lower at Rs 26,977/Kg. Prices opened at Rs 27,405/kg and fell to a low of Rs 26,921/Kg during the day's trading.