Mixed end for precious metals

Gold fails to benefit from short covering

Precious metals ended mixed on Monday, 10 May at Comex. News of Europe's $970 billion financial-stabilization package reduced some demand for gold as a safe haven. But silver prices ended marginally higher. The dollar slipped today mainly against the euro though the euro pared part of its gains at the end.

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 Monday, gold for June delivery ended at $1,200.8 an ounce, lower by $9.6 (0.8%) an ounce on the New York Mercantile Exchange. It fell to a low of $1,198 during intra day trading. Last couple of days, gold prices had increased as uncertainty loomed over euro zone's problems. Gold for June delivery had 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 2.5%. 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 9.4%.

On Monday, July Comex silver futures ended higher by 10 cents (0.55%) at $18.55 an ounce. Last week, silver ended lower by 0.9%. 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 6.8%.

A decision by the European Union and International Monetary Fund leaders to pledge financial support to the eurozone brought about a wave of buying and short covering that caused the stock markets across globe to surge in its best single-session percentage gain in more than a year.

As per latest reports, countries in the eurozone that face financial uncertainty will be eligible to receive some 500 billion euros from the EU and another 250 billion euros from the IMF. In addition to those measures, the European Central Bank will buy eurozone bonds from the secondary market and the Federal Reserve has reactivated swap lines with foreign institutions. At least for the time being, those efforts have eased contagion concerns that have surrounded Greece for weeks.

In the currency market today, the dollar index, which measures the strength of the dollar against a basket of six currencies, fell by 0.9%.

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 335 (1.9%) at Rs 17,598 per ten grams. Prices rose to a high of Rs 17,882 per 10 grams and fell to a low of Rs 17,358 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 111 (0.38%) lower at Rs 28,466/Kg. Prices opened at Rs 28,538/kg and fell to a low of Rs 28,009/Kg during the day's trading.