Precious metals lose some glitter

Prices drop as dollar heads up

Precious metals ended substantially lower on Thursday, 13 May at Comex. Prices dropped due to profit booking after yellow metal touched record highs couple of times in the past few days. The strong dollar also took some shine away from precious metals.

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 $1,229.2 an ounce, lower by $13.9 (1.1%) an ounce on the New York Mercantile Exchange. Yesterday, prices rose to a high of $1,249.3 during intra day trading. 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.

Gold opened in the red on Thursday but pared losses as the session progressed, even changing paths, and touching a fresh record in midday trading, but such gains were short lived as the euro remained under pressure against the dollar.

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 11.8%.

On Thursday, July Comex silver futures ended lower by 16 cents (0.8%) at $19.49 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 10.2%.

In the currency market today, the euro dropped once again against the dollar. The dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.6%.

Among economic data for the day, The Labor Department in US reported on Thursday, 13 May 2010 that the number of people applying for unemployment benefits essentially held steady at 444,000 in the latest week.

As per the report, claims fell by 4,000 in the week ended 8 May but the data was revised up by 4,000 for the prior week to a seasonally adjusted 448,000. Initial claims have fallen just 2.2% since the beginning of the year, but they are 29% lower compared with a year ago. The four-week average of initial claims, a better gauge of employment trends than the volatile weekly number, dropped by 9,000 to 450,500.

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 199 (1.09%) at Rs 18,030 per ten grams. Prices rose to a high of Rs 18,201 per 10 grams and fell to a low of Rs 17,966 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 234 (0.78%) lower at Rs 29,708/Kg. Prices opened at Rs 29,850/kg and fell to a low of Rs 29,522/Kg during the day's trading.