Precious metals back on their winning spree

Prices rise as dollar slumps following Fed's comments

Precious metals once again rose to new highs on Wednesday, 13 October 2010 at Comex. Prices rose as the dollar slumped following Federal Reserve's latest comments on last Tuesday.



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 Wednesday, gold for December delivery ended at $1,370.5 an ounce, higher by $23.8 (1.8%) on the New York Mercantile Exchange. Till date, gold had registered last record close on last Monday at $1,350.5. Last week, gold ended higher by 2.1%. It was the eighth weekly gains for gold.

Gold ended the month of September 2010 and the third quarter higher by 5%. It was eighth consecutive quarterly gain for gold. For the second quarter, gold ended up by 12%. For the first quarter of this year, gold rose by 1.7%. On a year to date basis, gold is higher by 22.2%.

On Wednesday, December Comex silver futures ended higher by 78 cents (3.4%) at $23.93. Last week, silver ended higher by 4.8%, its fourth straight weekly gains. For the month of September, silver ended higher by 12%. For the third quarter, silver gained nearly 18%. 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 39.7%.

In the currency market on Wednesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies fell by almost 0.5%.

According to the minutes released by Federal Reserve on Tuesday, 12 October 2010, members are prepared to provide additional accommodation, if needed, to support the economic recovery and to return inflation, over time, to levels consistent with the FOMC mandate. While such accommodation may be appropriate before long, members made clear that any decisions would depend upon future information about the economic situation and outlook.

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 December delivery closed higher by Rs 235 (1.4%) at Rs 19,890 per ten grams. Prices rose to a high of Rs 19,938 per 10 grams and fell to a low of Rs 19,684 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 896 (2.6%) higher at Rs 35,694/Kg. Prices opened at Rs 34,890/kg and rose to a high of Rs 35,770/Kg during the day's trading.