Bullion metals shine

Weak housing data imparts glaze to precious metals

Bullion metal prices ended higher on Tuesday, 24 August 2010 at Comex. Worse than expected housing data pushed US stocks substantially lower on Tuesday thereby increasing the appeal of precious metals as an alternate investment. Prices also rose as dollar erased earlier gains and ended almost flat. Precious metals were the only ones among commodities to end higher today.



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 Tuesday, gold for December delivery ended at $1,233.4 an ounce, higher by $4.9 (0.4%) on the New York Mercantile Exchange. During intra day trading, prices fell to a low of $1,211.7. Last week, gold ended higher by 1%.

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 13.2%.

On Tuesday, September Comex silver futures ended higher by 39 cents (2.2%) at $18.37. Last week, silver ended lower by 0.6%. 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 4.7%.

In the currency market on Tuesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies went up by 0.7% initially but then pared its gains and ended almost flat.

National Association of Realtors reported on Tuesday that existing home sales in US plummeted 27% month-over-month to an annualized rate of 3.8 million units. Not only is that far below the 4.7 million units that had been expected, but the rate of decline and the actual sales level were the worst since records began in 1999. Hope for a revival in housing was further dashed with news that the total supply of homes now stands at 12.5 months.

Economic uncertainty led stocks lower in four straight sessions on Tuesday.

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 October delivery closed higher by Rs 115 (0.61%) at Rs 18,820 per ten grams. Prices rose to a high of Rs 18,860 per 10 grams and fell to a low of Rs 18,605 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 563 (1.9%) higher at Rs 29,450/Kg. Prices opened at Rs 28,860/kg and rose to a high of Rs 29,509/Kg during the day's trading