Dull day for precious metals

Bullion metals close at multi month lows

Precious metal prices steep fall and closed at lowest levels in almost a month's time on Tuesday, 15 March 2011 at Comex. Prices dropped as US and world stock markets crashed considerably after fearing its worst nuclear catastrophe since Chernobyl nearly 25 years ago. The dollar was the lone major asset that gained, applying further pressure on gold and other dollar-denominated commodities.



Gold for April delivery fell $32.1, or 2.3%, to $1,392.8 an ounce on the Comex division of the New York Mercantile Exchange. It was the largest loss in percentage terms since the beginning of the year. 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 fell $1.72 cents (4.8%) to end at $34.12. It was the lowest settlement for silver in one and half month's time. 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%.

A devastating earthquake coupled with a Tsunami rocked Northern Japan last weekend. Fears that the nuclear reactors, damaged by the quake, are at risk of a meltdown added to the country's woes. Japan is a top consumer of commodities just following China.

In U.S. economic news, New York manufacturing activity continued to expand in March, with more businesses raising prices in the face of higher costs, with a survey of business conditions handily beating expectations. The index for employment also jumped to a reading of 9.09 from 3.61 in February. But profit margins remained under intense pressure.

U.S. import prices also rose more than expected in February as costs increased for energy, industrial supplies and food. The price of goods imported to the U.S. climbed by 1.4% from the month before, topping consensus estimates of a 0.9% price increase in February.

In addition, the latest FOMC minutes were also expected today. As expected, the FOMC kept its key rate in the range 0.00% to 0.25%. It also announced that it will keep in place its plan to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. It is also maintaining its existing policy of reinvesting principal payments from its securities holdings.

In the currency market on Tuesday, the dollar stayed strong for the entire day, though it pared its gains partly at the end. The dollar index, which measures the strength of the dollar against a basket of six other currencies, rose by 0.1%.

At the MCX, gold prices for April delivery closed lower by Rs 393 (1.9%) at Rs 20,605 per ten grams. Prices rose to a high of Rs 20,946 per 10 grams and fell to a low of Rs 20,469 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 1,890 (3.5%) lower at Rs 52,084/Kg. Prices opened at Rs 53,802/kg and fell to a low of Rs 51,370/Kg during the day's trading.