Bullion metals manage to eke out gains

Strong dollar takes away some shine from them

Precious metal prices erased most of their earlier gains and ended marginally higher on Wednesday, 16 March 2011 at Comex. Prices erased gains as the dollar turned strong against its counterparts. Ongoing tensions in Middle East and US economic data also affected prices.



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.

Gold for April delivery rose $3.3, or 0.2%, to end at $1,396.1 an ounce on the Comex division of the New York Mercantile Exchange. During intra day trading, prices rose to a high of $1,406.6. Last week, gold lost 0.5%.

Gold ended the month of February higher by 5.6% following a 6.1% drop in January 2011. For the year of 2010, gold ended higher by 30%, its tenth consecutive yearly gain.

Silver prices for May delivery rose $0.36 (1%) to end at $34.47. Last week, silver gained 1.7%. Prices gained more than 20% in February 2011 after shedding 9% this year in January. In FY 2010, silver ended higher by 83.7%.

Worries about the mounting human and economic toll from last week's earthquake at Japan, which damaged some nuclear reactors pushed US stocks lower once again on Wednesday, 16 March 2011. It was reportedly said that citizens within 50 miles of Japan's Fukushima nuclear power plants should evacuate or remain indoors.

The overall mood among morning participants was further weakened by reports of increased violence and instability surrounding the social and political turmoil in the Middle East and North Africa.

US economic data disappointed on Wednesday. Housing starts for February made a surprisingly dramatic drop of more than 20% to an annualized rate of 479,000, which is the slowest pace in almost two years. Building permits for February fell 8.2% in an unexpected drop.

As for Producer prices, the headline PPI number for February increased by 1.6% for its sharpest spike since June 2009, but core producer prices increased by a much smaller 0.2%.

In the currency market on Wednesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, rose by 0.5%.

At the MCX, gold prices for April delivery closed higher by Rs 47 (0.22%) at Rs 20,652 per ten grams. Prices rose to a high of Rs 20,734 per 10 grams and fell to a low of Rs 20,601 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 119 (0.23%) higher at Rs 52,203/Kg. Prices opened at Rs 52,128/kg and rose to a high of Rs 52,925/Kg during the day's trading.