Precious metals witness mixed end

Silver shines but gold turns pale

Precious metals ended mixed on Tuesday, 18 May at Comex. Gold prices registered drop while silver gained. Gold prices fell as traders anticipated that gold's recent striking of all time highs quite a few times last week was overdone. Strong dollar also took some shine away from yellow metal.

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 $1,214.6 an ounce, lower by $13.5 (1.1%) an ounce on the New York Mercantile Exchange. A sliding U.S. stock market and further losses for oil took a toll on gold as investors sold bullion to cover margin calls in stocks and other commodities. During intra day trading, prices fell to $1,206.6. 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 1.5%. 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 10.5%.

On Tuesday, July Comex silver futures ended higher by 2 cents (0.1%) at $18.88 an ounce. Last week, silver ended higher by 4.1%. 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%.

Clouds of uncertainty hanging over Europe dissipated a bit today as Greece said that it received 14.5 billion euros in loans from the European Commission and that its short-term financing needs are covered.

the news saw some renewed strength in the euro. However, the euro soon resumed its backslide. Its downturn steepened following news that Germany will ban naked short selling of certain financial stocks, credit default swaps, and government bonds. The euro dropped a sharp 1.5% to a fresh four-year low that was just above 1.2200 per dollar. In the currency market today, the Dollar Index spiked 1.1% to a fractionally improved 52-week high.

Among economic data for the day, The Commerce Department in US reported on Tuesday, 18 May 2010 that U.S. housing starts increased for the second straight month in April but building permits fell sharply. Hitting an 18-month high, housing starts rose an estimated 5.8% to a seasonally adjusted annual rate of 672,000 from an upwardly revised 635,000 in March. April's starts marked the highest level of new construction since October 2008, when the financial crisis worsened. Starts of single-family homes rose 10.2% in April to a 593,000-unit annual rate, the highest since August 2008.

However, building permits fell 11.5% to a seasonally adjusted annual rate of 606,000, the lowest in six months. Permits for single-family homes, also dropped, down 10.7% to a 484,000 annual rate. Housing starts are up 40.9% compared with the record low in April 2009, but they're down about 70% from the peak in 2006. Building permits are up 15.9% compared with a year earlier.

Separately, the Labor Department in US reported on Tuesday, 18 May 2010 that wholesale prices fell slightly in April as the cost of energy and food eased. The main producer price index fell 0.1%, seasonally adjusted. The more closely followed core rate, which excludes volatile energy and food prices, rose 0.2%. Over the past 12 months, wholesale prices have risen 5.5%, on an unadjusted basis. Yet the core rate has risen only 1% in the past 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 lower by Rs 252 (1.4%) at Rs 18,008 per ten grams. Prices rose to a high of Rs 18,250 per 10 grams and fell to a low of Rs 17,916 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 138 (0.5%) lower at Rs 29,255/Kg. Prices opened at Rs 29,301/kg and fell to a low of Rs 28,930/Kg during the day's trading.