Gold continues to shine

Silver drops again from its thirty-year high level

Precious metals ended mixed on Tuesday, 21 September 2010 at Comex. Yellow metal prices struck new record but silver reversed ended lower once again. Last week, silver had registered its highest close in three decades time. Gold prices shone following comments from Federal Reserve.



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. But bullion metals have registered increase in prices despite strong dollar in recent times and vice versa.

On Tuesday, gold for December delivery ended at $1,283.3 an ounce, higher by $7.6 (0.6%) on the New York Mercantile Exchange. This was by far an all time highest finish for the yellow metal. Last week, gold ended higher by 2.5%. It was the fifth weekly gains for gold in past six weeks.

Gold ended the month of August 2010 higher by 5.6% after ending July lower by 5%. It was the worst monthly loss for gold since December 2009. 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 18.6%.

On Tuesday, December Comex silver futures ended lower by a 16 cents (0.8%) at $20.64. Last week, silver ended higher by 3.5%. Last week, silver had closed at its highest level in three decades. For the month of August, silver ended higher by 8%. In 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 18%.

Among economic reports expected for the day, he Commerce Department in US reported on Tuesday, 21 September 2010 that home construction in US increased in August 2010 and applications for building permits also grew. The gains were driven mainly by apartment and condominium construction, not the much larger single-family homes sector.

As per the report, construction of new homes and apartments rose 10.5% in August from a month earlier to a seasonally adjusted annual rate of 598,000. That's the highest level since April. Market had expected housing starts to drop to 535,000 on a seasonally adjusted basis.

Also, latest FOMC statement indicated that the target range for the federal funds rate will be maintained at 0.00% to 0.25% and that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The statement also indicated that the Fed is prepared to provide additional accomodation if needed.

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 lower by Rs 84 (0.4%) at Rs 19,018 per ten grams. Prices rose to a high of Rs 19,132 per 10 grams and fell to a low of Rs 19,008 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 207 (0.64%) lower at Rs 31,937/Kg. Prices opened at Rs 32,126/kg and fell to a low of Rs 31,825/Kg during the day's trading