Precious metals shine

Dollar weakness props up precious metals

Weakness in the dollar propped up precious metals on Tuesday, 02 November 2010. Anticipation among traders regarding Fed's moves on quantitative easing this week also took precious metals higher.



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 Tuesday, gold for December delivery ended at $1,353.2 an ounce, higher by $2.4 (0.2%) on the New York Mercantile Exchange. Last week, gold ended higher by 2.5%.

Gold ended the month of October 2010 higher by 3.8%. Before this, it ended 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 23.1%.

The metal hit its recent string of record highs in October amid quantitative-easing expectations and related inflation fears, as well as on the back of the dollar's trend of weakness. Gold's recent lower prices have been lending some support for sales of physical gold, offering a floor to prices.

On Tuesday, December Comex silver futures ended higher by 28 cents (1.2%) at $24.84. With today's close, silver returned to its thirty-month high figure. Last week, silver ended higher by 6.2%. For the month of October, silver gained 13%, its third consecutive monthly gain. In 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 45.3%.

In the currency market on Tuesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies fell by 0.8%. Speculation that any future measures of quantitative easing might be applied gradually or be smaller in scope have kept the dollar volatile in recent times.

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.

At the MCX, gold prices for December delivery closed lower by Rs 5 (0.02%) at Rs 19,708 per ten grams. Prices rose to a high of Rs 19,779 per 10 grams and fell to a low of Rs 19,636 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 216 (0.58%) higher at Rs 37,167/Kg. Prices opened at Rs 37,090/kg and rose to a high of Rs 37,250/Kg during the day's trading.