Gold ends above the $1,200 mark

Prices rise due to weak dollar and weak economic data

Bullion metal prices ended higher on Friday, 06 August 2010 at Comex. A weaker than expected non-farm payroll data increased the appeal of precious metals as an alternate investment. Prices also rose due to weak dollar.



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 Friday, gold for December delivery ended at $1,205.3 an ounce, higher by $6 (0.5%) on the New York Mercantile Exchange. During intra day trading, prices touched a high of $1,213.3. Prices rose for eight consecutive sessions. For the week, gold ended higher by 1.8%.

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 10.7%.

On Friday, September Comex silver futures ended higher by 15 cents (0.8%) at $18.47 an ounce. For the week, silver ended higher by 2.6%. 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%.

Earlier during the week, China announced moves to broaden its gold market, including letting more banks to import and export gold and creating more yuan-denominated gold derivatives.

Among the economic data expected for the day, The Labor Department in US reported on Friday, 06 August 2010 that total nonfarm payrolls fell by a seasonally adjusted 131,000 in July 2010. The nation's unemployment rate held steady at 9.5%.

But all the lost jobs were temporary jobs at the U.S. Census. Private-sector payrolls rose by an estimated 71,000 in July. The increase in private payrolls was weaker than the 100,000 increase that had been expected by Wall Street. It showed that U.S. employers continued to hire but at a sluggish pace adding to pessimism about the economic outlook.

In the currency market on Friday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by 0.5%.

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 higher by Rs 91 (0.5%) at Rs 18,200 per ten grams. Prices rose to a high of Rs 18,230 per 10 grams and fell to a low of Rs 18,030 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 113 (0.4%) higher at Rs 29,127/Kg. Prices opened at Rs 28,972/kg and rose to a high of Rs 29,190/Kg during the day's trading.