Precious metals add shine

Precious metals add decent gains for the first quarter

Precious metal prices ended higher on Wednesday, 31 March 2010. Prices rose as the dollar weakened today.

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 June delivery ended at $1,114.5 an ounce, higher by $8.8 (0.8%) an ounce on the New York Mercantile Exchange. Last week, gold ended marginally lower by 0.2%. 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%.

On Wednesday, May Comex silver futures ended higher by 20 cents (1.1%) at $17.53 an ounce. Last week, silver ended lower by 0.7%. For the month of March, silver ended higher by 5%. For the first quarter of this year, silver rose by 3%.

In the currency market on Wednesday, the dollar index, which measures the strength of the dollar against basket of six other currencies slipped. The dollar index gained about 0.7% this month. The dollar has rallied 4% this quarter.

In a report released earlier this week, the World Gold Council said that demand for gold from China could double in the next decade due to higher investment demand. As per the report, demand for gold in China reached 423 metric tons, or 466 short tons, last year, but domestic mines contributed only 314 metric tons, or 346 short tons. This shortfall creates a "snowball" effect as China's gold industry has to rely on imports.

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 higher by Rs 57 (0.34%) at Rs 16,436 per ten grams. Prices rose to a high of Rs 16,507 per 10 grams and fell to a low of Rs 16,380 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 105 (0.39%) higher at Rs 26,935/Kg. Prices opened at Rs 26,846/kg and rose to a high of Rs 27,039/Kg during the day's trading.