Bullion metals manage to end higher

Mixed economic data increases the appeal of bullion metal prices

Bullion metal prices ended higher on Thursday, 15 July 2010 at Comex. Prices erased earlier losses as Federal Reserve's recent pessimistic view about the US economy increased the appeal of precious metals as an alternate investment. The weak dollar also aided in rising 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 Thursday, gold for August delivery ended at $1,208.3 an ounce, higher by $1.3 (0.1%) an ounce on the New York Mercantile Exchange. Earlier in the day, prices seesawed between gains and losses. 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 11.2%.

On Thursday, September Comex silver futures ended higher by 7 cents (0.4%) at $18.36 an ounce. 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 5.6%.

On Thursday, Wall Street was flooded with a number of economic data, which were mixed in nature.

The Labor Department in US reported on Thursday, 15 July 2010 that the number of people submitting initial applications for state unemployment insurance benefits fell 29,000 to 429,000 last week, hitting the lowest level since August 2008. Market had expected first-time claims at a level of 445,000 for the week ended 10 July. Meanwhile, the four-week average of initial claims, a better gauge of employment trends than the volatile weekly number, also fell, down 11,750 to stand at 455,250.

Separate report showed that industrial production rose 0.1% in June, beating expectations of a decline. The Federal Reserve Bank of New York said that New York manufacturing expanded in July, but at a much slower pace than previous months.

Also, the Labor Department reported that U.S. wholesale prices fell 0.5% in June, the largest decline since February, led by food prices. The core price index, which excludes energy and food prices, rose 0.1%.

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against a basket of six other currencies fell by 1.1%.

On a separate note, Goldman Sachs lifted its 12-month target for gold by 1.5% to $1,355 an ounce, citing a low-interest rates environment and concerns over European debt.

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 17 (0.09%) at Rs 18,400 per ten grams. Prices rose to a high of Rs 18,485 per 10 grams and fell to a low of Rs 18,376 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 35 (0.12%) higher at Rs 29,170/Kg. Prices opened at Rs 29,186/kg and rose to a high of Rs 29,340/Kg during the day's trading.