Gold strikes new record

Weak dollar imparts shine to precious metals

Precious metals ended substantially higher on Tuesday, 14 September 2010 at Comex. Prices rose as the dollar weakened considerably. Prices rose despite stronger than expected economic reports.



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 Tuesday, gold for December delivery ended at $1,271.7 an ounce, higher by $24.6 (2%) on the New York Mercantile Exchange. This was a all time new record for the yellow metal. Last week, gold ended lower by 0.4%.

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 17.1%.

On Tuesday, December Comex silver futures ended higher by 28 cents (1.4%) to $20.43. Last week, silver ended lower by 0.5%. 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 16.8%.

In the currency market Tuesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies fell by 1%. Specifically, the euro rallied 0.9% against the dollar and the yen climbed 0.7% and, in doing so, booked a fresh 15-year high against the dollar.

Precious metals held on to gains even after the Commerce Department said U.S. retail sales rose 0.4% in August, more than the 0.3% expected. A gain of 1% for business inventories also didn't temper the rally.

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 higher by Rs 334 (1.8%) at Rs 19,195 per ten grams. Prices rose to a high of Rs 19,230 per 10 grams and fell to a low of Rs 18,890 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 378 (1.2%) higher at Rs 31,964/Kg. Prices opened at Rs 31,598/kg and rose to a high of Rs 32,039/Kg during the day's trading