Gold drops for first time in six sessions

Prices turn pale as dollar inches up

Precious metal prices ended lower for first time in six days on Thursday, 08 April 2010. Prices fell as the dollar firmed up following worse than expected economic data on initial claims.

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 June delivery ended at $1,152.9 an ounce, lower by $0.1 (0.1%) an ounce on the New York Mercantile Exchange. Last week, gold ended higher by 1.8%. In FY 2010, gold touched a high of $1,154 in January. For the month of March, gold slid 0.4%. For the first quarter of this year, gold rose by 1.7%, its sixth quarterly rise. On a year to date basis, gold is higher by 5%.

On Thursday, May Comex silver futures ended lower by 9 cents (0.5%) at $17.3 an ounce. For the month of March, silver ended higher by 5%. For the first quarter of this year, silver rose by 3%. On a year to date basis, silver is higher by 6.4%.

In the currency market on Thursday, the dollar firmed up following renewed concerns about Greece and its ability to manage its finances. The dollar index, which measures the strength of the dollar against basket of six other currencies rose by almost 0.1%. The dollar index gained about 0.7% in March and rallied 4% during the first quarter. The dollar index has gained 5.4% this year till date.

The Labor Department in US reported on Thursday, 08 April 2010 that the number of people applying for unemployment benefits rose 18,000 to a seasonally adjusted 460,000 in the week ended 3 April. Market was expecting the figure to be around 442,000.

The four-week average of initial claims, a better gauge of employment trends than the volatile weekly number rose 2,250 to 450,250. The report detailed that initial claims are down almost 30% from the same period of the prior year.

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 June delivery closed lower by Rs 23 (0.13%) at Rs 16,765 per ten grams. Prices rose to a high of Rs 16,806 per 10 grams and fell to a low of Rs 16,692 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 179 (0.64%) lower at Rs 27,450/Kg. Prices opened at Rs 27,603/kg and fell to a low of Rs 27,268/Kg during the day's trading.