Bullion metals end mixed

Gold drops for third straight day but silver rises

Precious metal prices ended mixed on Wednesday, 24 February 2010. Yellow metal prices slipped for third consecutive day as the dollar weakened in the early going and as Fed chief Ben Bernanke said that the move to sustain economic recovery would not necessarily translate into an increase in the benchmark funds rate anytime soon. Silver prices rose.

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 Wednesday, gold for April delivery ended at $1,097.2 an ounce, lower by $6 (0.5%) an ounce on the New York Mercantile Exchange. Last week, gold gained 3.1%. For January 2010, gold lost 1.2%. Year to date, gold is higher by 0.3%.

On Wednesday, March Comex silver futures ended higher by 5 cents (0.3%) at $15.94 an ounce. Last week, silver ended higher by 4.1%. In January 2010, silver shed 3.9%. Year to date in FY 2010, silver has dropped by almost 3.6%.

In the currency market on Wednesday, the dollar extended its morning slide so that it traded with a loss of 0.7% against competing currencies.

Among the major economic data expected for the day, the Commerce Department reported that new-home sales skidded 11.2% in January from December to a seasonally adjusted, annual rate of 309,000. Market had expected a slight rise in sales, to a pace of 355,000. The drop erased all gains made in the housing market during the past year.

The World Gold Council reported last week that demand for gold climbed 2.6% in the fourth quarter from the prior three-month period. Gold consumption increased to 819.7 metric tons with prices averaging 15% more on a quarter-to-quarter basis. Conversely, demand for gold fell 24% in the fourth quarter from a year ago, and was down 11% in 2009 versus the year earlier.

Gold had ended FY 2009 higher by 24%. Silver futures had ended 2009 up 50%. The dollar index had lost 4.2% against its counterparts last year.

Last year, after hitting a low at $807.30 per ounce on 15 January 2009, gold futures rallied almost 51% to hit an all-time high at $1217.40 per ounce during early December of 2009 but fell from those levels at the end. Silver futures had hit a low at $10.42 on 15 January 2009 and hit a high at $19.30 per ounce on 2 December 2009. Like gold, silver also ended lower than its all time high level.

At the MCX, gold prices for April delivery closed lower by Rs 103 (0.62%) at Rs 16,488 per ten grams. Prices rose to a high of Rs 16,637 per 10 grams and fell to a low of Rs 16,411 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 10 (0.04%) lower at Rs 24,844/Kg. Prices opened at Rs 24,855/kg and fell to a low of Rs 24,551/Kg during the day's trading.