Bullion metals give up some glaze

Prices drop on hopes of economic recovery

Bullion metal prices ended lower on Thursday, 08 July 2010 at Comex. Prices fell after the initial claims report by Labor Department, which fed into hopes that the U.S. labor market is on the mend thereby reducing appeal of precious metals as an alternate investment.



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. Recently, the embattled euro has played stronger role in moving prices rather than dollar fluctuation. Bullion metals have registered increase in prices despite strong dollar in recent times and vice versa.

On Thursday, gold for August delivery ended at $1,196.1 an ounce, lower by $2.8 (0.2%) an ounce on the New York Mercantile Exchange. Bullion fell after the claims report, which fed into hopes that the U.S. labor market is on the mend. At the same time, lingering doubts about so-called stress tests to be conducted on the largest European banks, as well as about the pace of economic recovery, provided some support for gold. Last week, gold ended lower by 4%.

Gold ended the month of June higher by 2.5%. For the second quarter, gold ended up by 12%, its seventh consecutive quarterly gain. For the first quarter of this year, gold rose by 1.7%. On a year to date basis, gold is higher by 10.2%.

On Thursday, September Comex silver futures ended lower by 13 cents (0.7%) at $17.87 an ounce. Last week, silver ended lower by 7%. For the second quarter, silver ended higher by 3.1%. For the first quarter of this year, silver rose by 3%. On a year to date basis, silver is higher by 1.6%.

The Labor Department in US reported on Thursday, 08 July 2010 that the number of people filing first-time claims for unemployment benefits sank 21,000 in the latest week to a still-high 454,000, maintaining a recent see-saw pattern. Market expected a figure around 460,000.

Late Wednesday, the International Monetary Fund raised its outlook for global economic growth for 2010 and pegged its forecast for U.S. growth at 3.3%. However, the IMF's updated estimate also warned of looming risk coming out of Europe's debt issues.

China's yesterday's comment that it was not boosting its gold positions hurt markets. Investors were also disturbed by reports that the Bank for International Settlement, the central bank of the world's central banks, had allowed for a record number of gold swaps. China's foreign-exchange regulator said its central bank would not increase its position in gold, citing limited global bullion supply and price volatility.

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 54 (0.3%) at Rs 18,313 per ten grams. Prices rose to a high of Rs 18,466 per 10 grams and fell to a low of Rs 18,225 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 176 (0.6%) lower at Rs 28,734/Kg. Prices opened at Rs 28,950/kg and fell to a low of Rs 28,582/Kg during the day's trading.