Precious metals add glaze

Prices rise due to weak dollar

Bullion metal prices ended higher on Monday, 16 August 2010 at Comex. Prices rose due to weak dollar and weak set of economic data.



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 $1,226.2 an ounce, higher by $9.6 (0.8%) on the New York Mercantile Exchange. Last week, gold ended higher by 0.9%.

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 12.5%.

On Monday, September Comex silver futures ended higher by 32 cents (1.8%) at $18.43 an ounce. Last week, silver ended lower by 2%. 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 3.9%.

In the currency market on Monday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by 0.6%.

Among economic data expected for the day, it showed that the National Association of Home Builders/Wells Fargo Housing Market Index fell to 13, its worst reading since March 2009. Market had anticipated a rise to 15 from 14 previously. In addition, Federal Reserve Bank of New York data showed a smaller-than-expected rebound in its Empire State manufacturing index, which rose to 7.1 in August from 5.1 in July.

Investors also digested data reported overnight that Japan's gross domestic product rose just 0.4% in the second quarter, much worse than the 2.3% market had expected.

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 107 (0.6%) at Rs 18,672 per ten grams. Prices rose to a high of Rs 18,732 per 10 grams and fell to a low of Rs 18,537 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 339 (1.2%) higher at Rs 29,378/Kg. Prices opened at Rs 29,078/kg and rose to a high of Rs 29,449/Kg during the day's trading.