Precious metals continue to shine

Prices remain high despite dollar paring early losses

Precious metals remained strong on Monday, 11 October 2010 at Comex, even as the dollar erased earlier losses and inched up. Last week's disappointing job report weighed on the dollar initially as the traders anticipated that Fed would take additional steps to boost the economy.



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 Monday, gold for December delivery ended at $1,354.4 an ounce, higher by $9.1 (0.7%) on the New York Mercantile Exchange. During intra day trading, prices rose to a high of $1,356.3. 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 21%.

On Monday, December Comex silver futures ended higher by 24 cents (1.1%) at $23.35. 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 37.2%.

In the currency market on Monday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies fell initially but then pared all early losses and ended 0.3% higher.

The Labor Department in US reported on last Friday, 07 October 2010 that the number of people who filed new claims for state unemployment benefits fell 11,000 to 445,000 during the week ended 2 October 2010, the lowest level since early July.

Market had expected initial claims to rise to a seasonally adjusted 455,000 in the week. Claims for last week were revised up by 3,000 to 456,000. The four-week average decreased by 3,000 to 455,750. A more accurate gauge of employment trends is the four-week average of initial claims, which is less volatile than the weekly number.

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 140 (0.7%) at Rs 19,669 per ten grams. Prices rose to a high of Rs 19,678 per 10 grams and fell to a low of Rs 19,545 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 193 (0.55%) higher at Rs 34,894/Kg. Prices opened at Rs 34,800/kg and rose to a high of Rs 34,980/Kg during the day's trading.