Precious metals turn little dull

Prices drop as dollar regains some strength

Precious metals dropped a little from their all time highs on Monday, 04 October 2010 at Comex. Prices shed early gains as the dollar strengthened following concerns in the euro zone 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 $1,316.8 an ounce, lower by $1 (0.1%) on the New York Mercantile Exchange. Last week, gold ended higher by 1.5%. It was the seventh 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 19.5%.

On Monday, December Comex silver futures ended lower by 2 cents (0.1%) at $22.04. Last week, silver ended higher by 3%. 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 31.7%.

In the currency market on Monday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies rose by 0.4%. The euro on Monday got hit on a further rise in unemployment reported in Spain, and comments by Nobel-Prize-winning economist Joseph Stiglitz in a British newspaper on the perils surrounding the common currency contributed as well.

Among economic data expected for the day, factory orders for August fell 0.5%, which is a bit steeper than the 0.4% decline that had been expected. Orders for the prior month were revised higher to reflect a 0.5% increase.

Additionally, pending home sales increased a stronger-than-expected 4.3% month-over-month against an expected increase of just 1% increase. Data for the prior month was revised downward to reflect a 4.5% increase, though.

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 28 (0.14%) at Rs 19,241 per ten grams. Prices rose to a high of Rs 19,272 per 10 grams and fell to a low of Rs 19,167 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 55 (0.12%) higher at Rs 33,173/Kg. Prices opened at Rs 33,162/kg and rose to a high of Rs 33,258/Kg during the day's trading.