Gold drops from highest levels in five months

Precious metals pare early gains and end sharply lower

Precious metals pared all their gains and ended sharply lower at Comex on Tuesday, 04 May 2010. Prices fell in tandem with US equities. U.S. stocks fell sharply on Tuesday as concerns over Greece's bailout package and Europe's national debts weighed on sentiment and as dollar once again climbed up against the euro.

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 June delivery ended at $1,169.2 an ounce, lower by $14.1 (1.2%) an ounce on the New York Mercantile Exchange. Earlier in the day, it had hit an intra day high of $1,192.4. Yesterday, gold had witnessed the highest level in five months. Gold for June delivery settled above $1,200 in early December, only to pull back to $1,172 area and dip as much as the $1,050 vicinity in early February. Last week, gold ended higher by 2.3%. For the month of April, gold ended higher by 6%. 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 6.7%.

On Tuesday, July Comex silver futures ended lower by $1 cents (5.3%) at $17.84 an ounce. Last week, silver ended higher by 2.4%. For the month of April, silver ended higher by 4.1%. For the first quarter of this year, silver rose by 3%. On a year to date basis, silver is higher by 2.8%.

A bailout package worth some $146 billion for Greece was announced over the weekend, but it was not enough to restore investors' confidence about the euro-zone countries and the euro and investors again sought gold as a hedge against currency fears.

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against basket of six other currencies rose by 1.2%. The dollar is up some 6.7% for the 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 higher by Rs 2 (0.01%) at Rs 17,188 per ten grams. Prices rose to a high of Rs 17,362 per 10 grams and fell to a low of Rs 17,125 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 931 (3.3%) lower at Rs 27,605/Kg. Prices opened at Rs 28,461/kg and fell to a low of Rs 27,450/Kg during the day's trading.