Bullion metals add little shine

Prices go up despite dollar gaining marginally

Precious metal prices ended little higher on Wednesday, 17 March 2010. Prices rose as the dollar stayed steady following yesterday's comments from Federal Open Market Committee regarding keeping interest rates low for quite some period now.

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 $1,124.2 an ounce, higher by $1.7 (0.2%) an ounce on the New York Mercantile Exchange. Last week, gold fell 2.4%. In FY 2010, gold touched a high of $1,154 in January.

On Wednesday, May Comex silver futures ended higher by 16.6 cents (0.9%) at $17.502 an ounce. Last week, silver ended lower by almost 1.9%.

The latest FOMC policy statement that came out yesterday was little changed from previous directives. The Fed has left its target federal funds rate unchanged at a range of 0.00% to 0.25% and the Fed said that it continues to expect an exceptionally low level for an extended period.

In the currency market on Wednesday, the dollar index gained slightly and remained slipped up following Fed's comments.

The latest dose of U.S. data showed a sharper-than-expected decline in overall prices and an in-line increase in core prices. The Labor Department's Producer Price Index declined 0.6% in February, its largest drop in seven months. Taking out food and energy costs, the index gained 0.1%.

On Capitol Hill, Federal Reserve Chairman Ben Bernanke testified on Wednesday about efforts to reform banking regulation, telling Congress the Fed's participation in the oversight of banks improves its ability to carry out its monetary goals.

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 31 (0.18%) at Rs 16,687 per ten grams. Prices rose to a high of Rs 16,803 per 10 grams and fell to a low of Rs 16,655 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 132 (0.48%) higher at Rs 27,169/Kg. Prices opened at Rs 27,082/kg and rose to a high of Rs 27,258/Kg during the day's trading.