Precious metals gather shine

Prices rise after economic data disappoint

Bullion metal prices ended higher on Thursday, 12 August 2010 at Comex. Prices rose despite a strong dollar after initial claims data checked in worse than expected at Wall Street thereby increasing the appeal of precious metals as an alternate investment vis a vis equities.



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 Thursday, gold for December delivery ended at $1,216.7 an ounce, higher by $17.5 (1.5%) on the New York Mercantile Exchange. 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 11.7%.

On Thursday, September Comex silver futures ended higher by 16 cents (0.7%) at $18.07 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 2.3%.

In the currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by 0.4%.

The Labor Department in US reported on Thursday, 12 August 2010 that the number of initial claims for regular state unemployment insurance benefits rose 2,000 to 484,000 in the week ended 7 August. It reached the highest level since February. Market had expected a level of 463,000.

The four-week average of initial claims, a more accurate gauge of employment trends, rose 14,250 to 473,500, also the highest level since February. For the prior week, the initial claims level was revised higher to 482,000 from a previous estimate of 479,000. The number of workers who continued to receive state unemployment checks fell by 118,000 to 4.45 million in the week ended 31 July. The four-week average of these continuing claims fell 64,500 to 4.52 million.

In addition, the Labor Department in US reported on Thursday, 12 August 2010 that prices of goods imported into the United States increased 0.2% in July, after two months of declines. Fuel-import prices rose 2.1% in July, while prices for non-fuel imports fell 0.3%. Import prices are up 4.9% in the past year, with a gain of 14.8% for fuel imports, and a 2.8% increase for non-fuel imports. Export prices fell 0.2% in July, including a 0.1% decline for agriculture exports, and a 0.2% decline for non-agricultural exports. In June, export prices were down 0.7%. For the year, export prices are up 3.9%.

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.