Dull day for precious metals

Prices drop as dollar strengthens

Precious metal prices ended lower on Friday, 25 March 2011 at Comex. Prices dropped as the dollar strengthened. Ongoing violence in Libya and other parts of Mid East coupled with crisis at Japan kept the price fall under check. Both encountered selling pressure after Philadelphia Fed President Plosser stated his proposal for normalizing monetary policy.



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 fell $8.7, or 0.5%, to end at $1,426.2 an ounce on the Comex division of the New York Mercantile Exchange. It traded at a high of $1,438.1 during intra day trading. For the week, gold gained 0.7%.

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 lost 33 cents (0.9%) to end at $37.05. For the week, silver gained 5.7%. Prices gained more than 20% in February 2011 after shedding 9% this year in January. In FY 2010, silver ended higher by 83.7%.

In the currency market on Friday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by 0.6%. The dollar extended gains on the euro over concerns about the latest twists in Europe's sovereign-debt crisis.

Among economic data expected for the day, the third estimate for fourth quarter GDP, was revised upward to reflect growth of 3.1%. Market had called for a 2.9% increase.

On Friday. Philadelphia Fed President Plosser acknowledged that an improving economy needs for a strategy to normalize monetary policy. Plosser expressed favor for a strategy that involves raising rates and shrinking the balance sheet concurrently and tying the pace of asset sales to the pace and size of interest rate increases.