Bullion metals shine

Gold stays below the $1,200 mark for fifth consecutive day

Bullion metal prices ended higher on Thursday, 22 July 2010 at Comex. Prices were boosted following a batch of better than expected earning reports. Gold investors were also waiting to hear the results of European banks' stress tests to be released on Friday.



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 $1,195.6 an ounce, higher by $3.8 (0.3%) on the New York Mercantile Exchange. During intra day trading, prices fell to a low of $1,180.7. Prices have stayed below the $1,200 mark for five consecutive sessions. Last week, gold ended lower by 1.7%.

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 10.1%.

On Thursday, September Comex silver futures ended higher by 32 cents (1.8%) at $18.12 an ounce. Last week, silver ended lower by 1.6%. 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 7.3%.

Among the major earning reports expected for the day, UPS bested expectations for the bottom line, and also came out with an increased outlook. Dow components 3M and Caterpillar also reported better-than-expected bottom line results. 3M also issued upside guidance, while Caterpillar raised its forecast so that it is in step with what Wall Street has forecast.

Among other blue chips, AT&T posted an upside surprise and raised its outlook, but Travelers came short of the consensus earnings estimate and even cut its forecast.

Fed Chairman Bernanke, made his semiannual monetary policy report to the Senate Banking Committee yesterday. Bernanke spoke of continued uncertainty in the economy and made note of the Fed's preparations to take more policy actions as needed.

Among economic data expected for the day, The Labor Department reported on Thursday, 22 July 2010 that the number of people submitting initial applications for state unemployment insurance benefits jumped 37,000 to stand at a higher-than-expected 464,000 for the week ended 17 July 2010. Market had expected first-time claims to come in higher around a level of 450,000.

The average number of workers filing claims over the past four weeks (continuing claims) rose 1,250 to 456,000. The four-week average is considered a better gauge of the state of the labor market than the volatile weekly number.

Also, the National Association of Realtors reported on Thursday, 22 July 2010 that resale of U.S. homes fell 5.1% in June to a seasonally adjusted annual rate of 5.37 million units. That is a better rate than the 5.09 million units that had been widely expected.

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 68 (0.4%) at Rs 18,296 per ten grams. Prices rose to a high of Rs 18,365 per 10 grams and fell to a low of Rs 18,222 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 225 (0.8%) higher at Rs 29,022/Kg. Prices opened at Rs 28,777/kg and rose to a high of Rs 29,120/Kg during the day's trading.