Precious metals on a roll

Prices go up further as dollar slumps

Precious metal prices rose for the second straight day on Tuesday, 09 February 2010. Prices rose as the dollar slipped following conflicting news about Greece's fiscal health and on reports whether Germany will come to its rescue.

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 April delivery ended at $1,077.2 an ounce, higher by $11 (1%) an ounce on the New York Mercantile Exchange. In these two days, gold has gained 2.3% and partly recovered the 6% drop it witnessed before that in three sessions. Last week, gold lost 2.9%. For January 2010, gold lost 1.2%. Year to date, gold has shed 1.6%.

On Tuesday, March Comex silver futures ended higher by 35.5 cents (2.3%) at $15.44 an ounce. Last week, silver ended lower by 7.8%. In January 2010, silver shed 3.9%. Year to date in FY 2010, silver has dropped by almost 7.7%.

In the currency market on Tuesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies fell by almost 0.8%. The euro advanced by almost 1% on reports that Michael Meister, deputy leader of the Christian Democratic Union/Christian Social Union in Bundestag, confirmed a rescue plan for Greece.

The dollar had risen to seven month high against its counterparts last week. Concern for the fiscal health of Greece had sent many global participants to seek safety in the U.S. dollar during recent sessions. However, speculation today that Greece could receive help from Germany gave the euro strength.

Precious metal prices started slipping since past couple of weeks due to impending worries from China front where tightening monetary policies are bothering investors due to shaky demand of metals in coming months.

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 higher by Rs 43 (0.3%) at Rs 16,319 per ten grams. Prices rose to a high of Rs 16,383 per 10 grams and fell to a low of Rs 16,225 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 284 (1.2%) higher at Rs 24,515/Kg. Prices opened at Rs 24,159/kg and rose to a high of Rs 24,644/Kg during the day's trading.