Bullion metals glow

Portugal's debt downgrade make traders return to bullion buying



Bullion metal prices ended substantially higher on Tuesday, 13 July 2010 at Comex. Prices rose after traders showed back interest in buying bullion metals following their recent drop in prices. Physical demand for bullion also provided required support as traders returned back to them following Portugal's debt downgrade. The weak dollar also aided in higher bullion metal prices.

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 Tuesday, gold for August delivery ended at $1,213.5 an ounce, higher by $14.8 (1.2%) an ounce on the New York Mercantile Exchange. The contract slid almost 1% on Monday. Last week, gold ended higher by 0.2%.

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 11.6%.

On Tuesday, September Comex silver futures ended higher by 34 cents (1.9%) at $18.26 an ounce. This was highest closing for silver in two weeks. Last week, silver ended higher by 5.6%. 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 4.5%.

On Tuesday, Moodys Investor Services downgraded Portugal's sovereign debt ratings by two notches from A1 to Aa2. This once again rekindled fears in the eurozone front and upset the recent revival in investor confidence over the global economic recovery.

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies fell by 0.7%.

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 84 (0.46%) at Rs 18,448 per ten grams. Prices rose to a high of Rs 18,518 per 10 grams and fell to a low of Rs 18,351 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 223 (0.8%) higher at Rs 29,044/Kg. Prices opened at Rs 28,800/kg and fell to a low of Rs 28,748/Kg during the day's trading.