Precious metals end in a mixed mode

Gold inches up but silver continues to turn pale

Bullion metal prices ended mixed on Wednesday, 11 August 2010 at Comex. Gold prices inched up but silver dropped. Gold prices pared most of their earlier gains and settled at session lows, a dollar below the $1200 mark. Prices fell as the dollar strengthened substantially.



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 Wednesday, gold for December delivery ended at $1,199.2 an ounce, higher by $1.2 (0.1%) on the New York Mercantile Exchange. During intra day trading, prices touched a high of $1,210.2. Last 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 10.2%.

On Wednesday, September Comex silver futures ended lower by 26 cents (1.4%) at $17.9 an ounce. Last 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 1.6%.

In the currency market on Wednesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by a huge 1.9%.

In the latest FOMC statement issued yesterday, according to the Fed, the economic recovery is likely to be more modest in the near term than had been anticipated. The latest statement also indicated that the target range for the federal funds rate will remain at 0.00% to 0.25% and that low resource utilization and subdued inflation are likely to warrant exceptionally low levels of the fed funds rate for an extended period.

The Commerce Department in US reported on Wednesday, 11 August 2010 that US trade deficit expanded by 18.8% in June, reaching $49.9 billion from $42.0 billion in May. The nation's trade deficit widened sharply in June on record imports of consumer goods. The widening of the deficit was much larger than expected. Market had expected the June deficit to hit $42.5 billion.

In June, imports increased sharply while exports declined. Imports rose 3.0% to $200.3 billion during the month, while exports fell 1.3% to $150.5 billion. Imports of goods alone jumped 3.3% to $167 billion, with the largest increase from imports of consumer and capital goods. Meanwhile, exports of goods alone slipped 2.2% to $105 billion, with exports of farm products at the lowest since September 2009. However, auto exports were the highest since October 2008, while exports of civilian aircraft rose slightly.

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 176 (0.96%) at Rs 18,381 per ten grams. Prices rose to a high of Rs 18,425 per 10 grams and fell to a low of Rs 18,230 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 163 (0.6%) lower at Rs 28,821/Kg. Prices opened at Rs 29,025/kg and fell to a low of Rs 28,721/Kg during the day's trading.