Bullion metals turn pale

Precious metals add more losses to their last week's loss

Bullion metal prices ended lower on Monday, 19 July 2010 at Comex. Prices continued with their last week's losses after inflation issues continued to grip the market thereby reducing the appeal of precious metals. The strong dollar also aided in slipping 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 Monday, gold for August delivery ended at $1,181.9 an ounce, lower by $6.3 (0.5%) an ounce on the New York Mercantile Exchange. 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 9%.

On Monday, September Comex silver futures ended lower by 25 cents (1.4%) at $17.54 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 4%.

The Labor Department in US reported last Friday, 16 July 2010 that U.S. consumers prices for goods and services fell slightly in June, mainly because of lower gasoline costs. The consumer-price index dropped a seasonally adjusted 0.1%, the third straight monthly decline. The closely followed core rate, seen as a better gauge of inflationary trends, rose 0.2% for the biggest gain since October 2009.

The biggest decrease in consumer prices in June occurred in energy, mostly gasoline for autos as well as electricity. Energy prices fell 2.9% for the second month in a row.

In the currency market on Monday, the dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.2%. But the dollar slipped against the euro.

Last week, 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 lower by Rs 67 (0.4%) at Rs 18,257 per ten grams. Prices rose to a high of Rs 18,336 per 10 grams and fell to a low of Rs 18,201 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 228 (0.8%) lower at Rs 28,573/Kg. Prices opened at Rs 28,739/kg and fell to a low of Rs 28,486/Kg during the day's trading.