Gold regains some of its lost glow

Silver continues to turn dull even as euro moderates its losses

Yellow metal regained some of its glaze as it pared early losses and ended modestly higher at Comex on Wednesday, 05 May 2010. Prices pared losses as US equities trimmed its losses and as euro stopped its decline against the dollar. However, silver prices tripped.

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 $1,175 an ounce, higher by $5.8 (0.5%) an ounce on the New York Mercantile Exchange. Earlier in the day, it had hit an intra day low of $1,156.2. Earlier in the week, 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 7.2%.

On Wednesday, July Comex silver futures ended lower by $0.32 cents (1.7%) at $17.53 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 1.1%.

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. But Greece was rocked with a general strike today and Athens was rocked with riots.

In the currency market on Wednesday, the euro modestly moderated its losses against the dollar.

Gold trimmed its losses after US economic data hit the wires. The Institute for Supply Management reported on Wednesday, 05 April 2010 that growth in the U.S. service sector was flat in April, but activity remained at the highest rate in four years. As per the report, the ISM non-manufacturing index stayed at 55.4% in April against an expected reading of 56. Readings over 50% indicate more firms believe business is getting better instead of worse.

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 126 (0.73%) at Rs 17,314 per ten grams. Prices rose to a high of Rs 17,354 per 10 grams and fell to a low of Rs 17,102 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 302 (1%) lower at Rs 27,303/Kg. Prices opened at Rs 27,510/kg and fell to a low of Rs 26,740/Kg during the day's trading.