Precious metals continue to stay weak

Strong dollar takes shine away from bullion metals

Precious metal prices ended substantially lower once again on Thursday, 03 June 2010 at Comex. Stronger dollar and higher US stocks pushed back bullion metal prices. Economic reports boosted US stocks in the later part of the day today and stocks managed to finish the day with marginal gains.

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 August delivery ended at $1,210 an ounce, lower by $12.6 (1%) an ounce on the New York Mercantile Exchange. Prices had touched an all time high of $1,249.7 on 14 May 2010. Gold for June delivery had settled above $1,200 in early December 2009, only to pull back to $1,172 area and dip as much as the $1,050 vicinity in early February 2010.

Last week, gold ended higher by 3.3%. Gold ended May higher by 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 10.3%.

On Thursday, July Comex silver futures ended lower by 38 cents (2.1%) at $17.93 an ounce. Last week, silver ended higher by 4.3%. For May, silver shed 1.1%. 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 3.3%.

In the currency market on Thursday, the dollar stayed relatively strong for almost the entire day and the dollar index ended the day with a 0.3% gain.

Among economic reports for the day, The Labor Department in US reported on Thursday, 03 June 2010 that the number of people applying for state unemployment benefits fell by 10,000 to 453,000 in the week ended 28 May. The four-week average of initial claims, a better gauge of employment trends than the volatile weekly number rose 1,750 to 459,000.

The Labor Department in US also reported on Thursday, 03 June 2010 that the productivity of U.S. nonfarm businesses was revised lower to an annualized 2.8% rate, as employees worked more hours than initially estimated. In its original forecast last month, the Labor Department reported first-quarter productivity of 3.6%, compared with a 6.3% increase in the final three months of 2009.

Separately, The Institute for Supply Management reported on Thursday, 03 June 2010 that services industries in the United States grew for the fifth straight month in May. The ISM non-manufacturing index was 55.4% in May for the third straight month. The index is at its highest seasonally adjusted level since May 2006. It fell as far as 37.2% in the depths of the recession in 2008.

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 August delivery closed lower by Rs 187 (1%) at Rs 18,450 per ten grams. Prices rose to a high of Rs 18,621 per 10 grams and fell to a low of Rs 18,390 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 499 (1.7%) lower at Rs 28,732/Kg. Prices opened at Rs 29,216/kg and fell to a low of Rs 28,610/Kg during the day's trading.