Precious metals on a roll

Prices shine as dollar slips from nine-month highs

Precious metal prices ended substantially higher on Tuesday, 16 February 2010. Prices rose as Greece's fiscal problems seemed to reduce thereby weakening the dollar and increasing the appeal of precious metals as an alternate investment.

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 $1,119.8 an ounce, higher by $29.8 (2.7%) an ounce on the New York Mercantile Exchange. During intra day trading, it rose to a high of $1,121.9. Last week, gold gained 4%. For January 2010, gold lost 1.2%. Year to date, gold is higher by 2.5%.

On Tuesday, March Comex silver futures ended higher by 71 cents (4.6%) at $16.15 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 1.2%.

In the currency market on Tuesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies slipped from its recent nine month highs and fell by almost 0.8%. The euro rose 1.3% as euro-zone finance ministers met in Brussels to discuss Greece's public finances.

Among economic report scheduled for the day, the Federal Reserve Bank of New York's Empire Manufacturing Survey showed conditions for New York manufacturers improved sharply in February, with its business conditions index rising to 24.91 this month, from 15.92 in January. Market had expected a reading of 16 in February.

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 126 (0.75%) at Rs 16,731 per ten grams. Prices rose to a high of Rs 16,793 per 10 grams and fell to a low of Rs 16,615 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 669 (2.7%) higher at Rs 25,198/Kg. Prices opened at Rs 24,560/kg and rose to a high of Rs 25,286/Kg during the day's trading.