Volatile precious metals end higher

Prices recover from intra day lows despite strong dollar

Yellow metal prices pared earlier losses and ended higher on Friday, 19 February 2010. Prices were volatile as Fed decided to hike its discount rate after a long time leading to speculation about withdrawal of stimulus package. The dollar rose to nine-month highs on Friday once again.

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 Friday, gold for April delivery ended at $1,122.1 an ounce, higher by $3.4 (0.3%) an ounce on the New York Mercantile Exchange. During intra day trading, it fell to a low of $1,099.3. For the week, gold gained 3.1%. For January 2010, gold lost 1.2%. Year to date, gold is higher by 2.5%.

On Friday, March Comex silver futures ended higher by 2.5 cents (0.2%) at $16.085 an ounce. For the 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 0.7%.

In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.3%.

Among economic report scheduled for the day, The Labor Department in US reported Friday, 19 February 2010 that core consumer prices fell 0.1% in January, the first such decline since 1982.

The World Gold Council reported during the 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.