Bullion metals shine

Prices rise as dollar weakens

Precious metals ended higher on Tuesday, 18 January 2011 at Comex. Prices rose as the dollar lost ground thereby increasing the appeal of precious metals as a hedge against inflation. Electronic and floor trading were closed on Monday for the Martin Luther King Jr. holiday.



On Tuesday, gold for February delivery rose by $7.7 (0.6%) ending at $1,368.2 an ounce on the New York Mercantile Exchange. Last week, gold ended lower by 0.6%. Gold prices have dropped 3.7% this year till date.

For the year of 2010, gold ended higher by 30%, its tenth consecutive yearly gain.

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, March Comex silver futures ended higher by 59 cents (2.1%) at $28.91. Prices lost 1.2% last week. Prices have shed 6.4% this year till date.

In FY 2010, silver ended higher by 83.7%.

In the currency market on Tuesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies was in constant search of direction and dropped by 0.4%.

Bullion metal prices are expected to continue with their joyride in the coming months with gold expected to reach between $1,600 and $1,700 an ounce and silver likely to attempt to test highs in the $50 area.