Precious metals strike historic highs

Prices show no sign of easing despite a strong dollar

Precious metal prices finished at historic highs on Monday, 08 November 2010. Despite a strengthening dollar, precious metals trended higher on momentum following last week's confirmation of a new round of quantitative easing.



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 $1,405 an ounce, higher by $15 (1%) on the New York Mercantile Exchange. During intra day trading, gold rose to a high of $1,409.5.

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 28%.

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.

On Wednesday, December Comex silver futures ended higher by 45 cents (2.9%) at $27.43. During intra day trading, prices rose to a high of $27.64. With today's close, silver returned to its thirty-month high figure. 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 49%.

In the currency market on Monday, the dollar index, at its high for the day, was up 0.8% against competing currencies, but it has since eased back to trade with a 0.5% gain.

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 higher by Rs 365 (1.8%) at Rs 20,336 per ten grams. Prices rose to a high of Rs 20,375 per 10 grams and fell to a low of Rs 19,996 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 1,364 (3.5%) higher at Rs 40,730/Kg. Prices opened at Rs 39,489/kg and rose to a high of Rs 40,866/Kg during the day's trading.