Precious metals shine

Gold and silver gain as euro drops to four-year lows

Yellow metal prices ended higher for sixth straight day on Tuesday, 01 June 2010. Prices rose as problems in the euro zone lingered and the euro dropped to four-year low levels. Strong manufacturing data on the US front also perked up prices. Markets were closed yesterday in observance of Memorial Day.

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 August delivery ended at $1,226.9 an ounce, higher by $11.9 (1%) an ounce on the New York Mercantile Exchange. 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 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 11.7%.

On Tuesday, July Comex silver futures ended higher by 12.9 cents (0.7%) at $18.551 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 6.7%.

In the currency market on Tuesday, the euro shed almost 2% against the dollar and fell to its lowest levels in more than four years on concerns that the euro zone problems will slow down the overall recovery of that region.

Among economic reports for the day, it was seen that activity in U.S. manufacturing slowed a bit in May after hitting a six-year high in April but still showed considerable momentum. The Institute for Supply Management index fell to 59.7% in May from 60.4% in April. This was above the 59% reading expected. Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting. The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better this month than last.

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 higher by Rs 318 (1.72%) at Rs 18,716 per ten grams. Prices rose to a high of Rs 18,815 per 10 grams and fell to a low of Rs 18,434 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 311 (1.06%) higher at Rs 29,603/Kg. Prices opened at Rs 29,320/kg and rose to a high of Rs 29,755/Kg during the day's trading.