Bullion metals drop from this year highs

Prices turn pale as dollar gains against euro

Precious metal prices ended lower and were off their 2010 highs on Thursday, 04 March, 2010. Prices fell as the dollar rose against the euro decreasing precious metal's appeal against an alternate investment. The dollar rose riding on the back of strong economic data and Europe's approval of Greece's plan to reduce its deficit.

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 Thursday, gold for April delivery ended at $1,133.1 an ounce, lower by $10.2 (0.9%) an ounce on the New York Mercantile Exchange. In FY 2010, gold touched a high of $1,154 in January.

On Thursday, May Comex silver futures ended lower by 15.3 (0.9%) cents at $17.176 an ounce.

In the currency market on Thursday, the dollar gained ground. Both the European Central Bank and the Bank of England left their benchmark interest rates unchanged, as expected. Bank of England also kept its quantitative easing measures unchanged. Europe's chief currency, the euro, has lost ground in the wake of the announcements and helped the dollar advance 0.7% against a basket of competing currencies.

Among key economic data, the Labor Department in US reported on Thursday, 04 March, 2010 that U.S. nonfarm businesses were more productive in the second half of last year than previously reported, slashing hours by 1.3% even as they boosted their output by 2.5%. In the fourth quarter, productivity increased at a 6.9% annual rate, revised up from the 6.2% reported a month ago.

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 72 (0.42%) at Rs 16,956 per ten grams. Prices rose to a high of Rs 17,055 per 10 grams and fell to a low of Rs 16,873 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 51 (0.19%) lower at Rs 26,922/Kg. Prices opened at Rs 26,930/kg and fell to a low of Rs 26,723/Kg during the day's trading.