Bullion metals end higher

Silver shines while gold remains in search of direction

Bullion metal prices ended higher on Monday, 02 August 2010 at Comex. A weak dollar coupled with strong rally in US stocks and better than expected economic data led to rise in 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 December delivery ended at $1,185.4 an ounce, higher by $1.5 (0.1%) on the New York Mercantile Exchange. Gold had opened in the red, staged a comeback, but swerved in and out positive territory in the later third of the session, lacking a strong reason to go one way or the other. Last week, gold ended lower by a mere 0.3%.

Gold ended the month of July lower by 5%. It was the worst monthly loss for gold since December 2009. Before this, it ended 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 higher by 42 cents (2.3%) at $18.42 an ounce. Last week, silver ended almost unchanged. For the month of July 2010, silver shed 3.7%. 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 8.5%.

In the currency market on Monday, the dollar index, which tracks the strength of dollar against a basket of six other currencies, fell by 0.8%.

The Institute for Supply Management in US reported on Monday, 02 August 2010 that its manufacturing index fell to 55.5% in July from 56.2% in June. This was the third decline in succession but the figure was above the expected figure of 55%.

The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better this month than last. Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting.

In a separate report, the Commerce Department reported that construction spending was up 0.1% in June. This was also higher than expected. However, spending in May was revised sharply lower to a 1% fall from the prior estimate of a 0.2% drop.

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 75 (0.41%) at Rs 17,862 per ten grams. Prices rose to a high of Rs 17,985 per 10 grams and fell to a low of Rs 17,820 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 354 (1.2%) higher at Rs 28,990/Kg. Prices opened at Rs 28,721/kg and rose to a high of Rs 29,197/Kg during the day's trading.