Precious metals rise despite a strong dollar

Prices remain steady due to Korean tensions and European debt problems

Precious metals ended higher on Monday, 20 December 2010 at Comex. Prices rose despite the dollar staying strong. Investors bought gold and other precious metals as a hedge against military tensions on the Korean peninsula and ongoing concerns about European sovereign debt.



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 February delivery ended at $1,386.1 an ounce, higher $6.9 (0.5%) on the New York Mercantile Exchange. It touched a high of $1,388.9 during intra day trading. Last week, gold had struck a new all time high of $1,416.1. Last week, gold ended lower by 0.4% on a weekly basis.

Gold prices had been on a roll since late August on expectations that Federal Reserve efforts at monetary stimulus will depress the dollar, making gold more valuable as an alternative store of wealth.

Gold ended the month of November higher by 2.1%. It had ended 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 25.5%.

On Monday, December Comex silver futures ended higher by $0.22 (0.8%) at $29.36. Prices gained 1.8% last week. It gained 15% in November.

Before this, 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 73.8%.

In the currency market on Monday, the dollar ran to its session high just following the open of U.S. equities and remained range between 80.55 and 80.70 for most of the session.

At the MCX, gold prices for February delivery closed higher by Rs 88 (0.42%) at Rs 20,607 per ten grams. Prices rose to a high of Rs 20,640 per 10 grams and fell to a low of Rs 20,535 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 209 (0.5%) higher at Rs 44,552/Kg. Prices opened at Rs 44,400/kg and rose to a high of Rs 44,689/Kg during the day's trading.