Precious metals turn extremely pale

Prices register big one-day drop in percentage terms in a long time

Bullion metal prices ended substantially lower on Thursday, 01 July 2010 at Comex. Prices shed gains in tandem with US equities and other commodities across the board. Both gold and silver registered big one-day percentage drops in a long time.



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 $1,206.7 an ounce, lower by $39.2 (3.1%) an ounce on the New York Mercantile Exchange. It was the biggest one-day percentage drop for yellow metal in five months. Last week, gold ended lower 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 10.1%.

On Thursday, July Comex silver futures ended lower by 92 cents (4.9%) at $17.79 an ounce. It was the biggest one-day percentage drop for silver in two months. Last week, silver ended lower by 0.4%. 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 1.2%.

US stocks dropped today following weak set of economic data. The Institute for Supply Management index fell from 59.7% in May to 56.2% in June, the lowest since December. Readings over 50% indicate most firms are growing.

The Labor Department in US reported on Thursday, 01 July 2010 that the number of people filing first-time claims for unemployment benefits climbed 13,000 in the latest week to 472,000, indicating continued weakness in the labor market. Market had expected initial claims to fall to 455,000.

Also, The National Association of Realtors reported on Thursday, 01 July 2010 that new sales contracts on existing homes fell sharply in May after a federal subsidy for buyers expired at the end of April. The report showed that the pending home sales index plunged 30% in May.

In addition to the above, overnight, two close watched measures of manufacturing activity in China pointed to slowing growth in June, further escalating worries about the state of the world's economic recovery and fueling fears over a drop for commodities.

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 320 (1.7%) at Rs 18,532 per ten grams. Prices rose to a high of Rs 18,875 per 10 grams and fell to a low of Rs 18,513 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 812 (2.7%) low