Precious metals continue to stay pale

Continue to fall as dollar adds more strength

Precious metals continued with their downward journey on Thursday, 06 January 2011 at Comex. Prices fell as the dollar witnessed considerable gains and traders continued to take to profit taking after the holiday season.



On Thursday, gold for February delivery fell by $2 (0.2%) ending at $1,371.7 an ounce on the New York Mercantile Exchange. Prices were trading higher earlier in the day, but the yellow metal soon pared all its gains. Earlier during the week, gold witnessed biggest one-day drop for gold in three weeks time. Last week, gold ended higher by 3%.

For the month of December, gold ended higher by 2.5%. It ended the fourth quarter, higher by 8%, its ninth consecutive quarterly gain. Before this, it ended the third quarter higher by 5%. For the second quarter, gold ended up by 12%. For the first quarter of 2010, gold rose by 1.7%. 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 Thursday, December Comex silver futures ended lower by $7 cents (0.3%) at $29.13. Prices gained 3.3% last week.

Silver prices gained almost 55% in the fourth quarter of this year. 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%. In FY 2010, silver ended higher by 83.7%.

In the currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies rose by 0.7%.

The Labor Department in US reported on Thursday, 06 January 2011 that the number of U.S. workers who filed new applications for unemployment benefits rose last week by 18,000 to 409,000, but the level of claims is still sharply lower from just six months ago. Market had expected initial claims to rise to a seasonally adjusted 400,000. Last week's jobless claims were revised up by 3,000.

The four-week average of new claims, however, fell 3,500 to 410,750, a two-and-a-half-year low. The moving average is considered a more accurate gauge of employment trends because it evens out fluctuations in the weekly data that can give a distorted picture of the labor market.

In the latest report Barclays Capital on Thursday released its prediction for gold prices in 2011. Gold is to average $1,495 an ounce this year and trade as high as $1,620 an ounce. Barclays expects silver to average $29.10 an ounce this year and trade as high as $36.50 an ounce.

Yesterday, HSBC raised its 2011 gold average price forecast to $1,450 an ounce from a previously forecast $1,425 an ounce. The bank sees gold at $1,300 an ounce in 2012, up from $1,275 an ounce earlier. HSBC raised its 2011 average price estimate for silver to $26 an ounce, from $20 an ounce. Silver in 2012 is likely to average $20 an ounce, from $17.50 an ounce

At the MCX, gold prices for February delivery closed lower by Rs 38 (0.18%) at Rs 20,428 per ten grams. Prices rose to a high of Rs 20,474 per 10 grams and fell to a low of Rs 20,315 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 110 (0.24%) lower at Rs 44,746/Kg. Prices opened at Rs 44,950/kg and fell to a low of Rs 44,311/Kg during the day's trading.