Bullion metals rise

Prices shine as dollar slips following Fed's comments

Precious metal prices ended higher on Tuesday, 16 March 2010. Prices rose as the dollar slipped following comments from Federal Open Market Committee, which hit the wires in the noon hours.

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 $1,122.5 an ounce, higher by $17.1 (1.5%) 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 Tuesday, April Comex silver futures ended higher by 24.2 cents (1.4%) at $17.35 an ounce. Last week, silver ended lower by almost 1.9%.

The latest FOMC policy statement that came out today 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 of interest rate for an extended period.

In the currency market on Tuesday, the dollar index slipped by almost 0.6% following Fed's comments.

According to the latest dose of U.S. data, investors were relieved to see U.S. import prices last month post their first monthly drop since July, reducing the specter of inflationary pressures. But housing starts declined more than expected - a reminder that the U.S. real-estate market remains under pressure.

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 180 (1.08%) at Rs 16,718 per ten grams. Prices rose to a high of Rs 16,766 per 10 grams and fell to a low of Rs 16,554 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 286 (1.06%) higher at Rs 27,037/Kg. Prices opened at Rs 26,820/kg and rose to a high of Rs 27,159/Kg during the day's trading.