Precious metals shed glaze

Prices drop as dollar strengthens following economic data

Precious metal prices dropped from their recent all time highs on Thursday, 21 October 2010 at Comex. Prices fell as the dollar strengthened. Better than expected batch of economic and earning reports pushed momentum towards equities today leaving commodities a bit behind.



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 Thursday, gold for December delivery ended at $1,325.6 an ounce, lower by $18.6 (1.4%) on the New York Mercantile Exchange. Last week, gold ended higher by 2%. It was the ninth 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 Thursday, December Comex silver futures ended lower by 73 cents (3%) at $23.14. Last week, silver ended higher by 5.1%. 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 38%.

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 almost 0.4%.

The Labor Department in US reported on Thursday, 21 October 2010 that initial claims (the number of people who signed up for state unemployment-insurance benefits) fell 23,000 to 452,000 last week, more or less in line with expectations. Data for the prior week was revised up to 475,000 from a prior estimate of 462,000.

Also, the Conference Board in US reported on Thursday, 21 October 2010 that its leading economic index rose 0.3% in September. The report termed U.S. economic growth as “slow” and doesn't have momentum.

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 lower by Rs 201 (1%) at Rs 19,328 per ten grams. Prices rose to a high of Rs 19,606 per 10 grams and fell to a low of Rs 19,306 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 741 (2%) lower at Rs 34,938/Kg. Prices opened at Rs 35,620/kg and fell to a low of Rs 34,875/Kg during the day's trading.