Precious metals turn pale

Prices drop from their recent highs as equities rally

Precious metals ended their long winning streak and ended lower on Tuesday, 23 August 2011 at Comex. Prices dropped as investors returned to equities after quite some time. US stocks witnessed good gains at Wall Street as equity markets around the globe also mostly rose on positive reports on manufacturing activity in China and Europe.

Gold for December delivery dropped $30.6 or 1.6%, to end at $1,861.3 an ounce on the Comex division of the New York Mercantile Exchange on Tuesday. During intra day trading, prices rose to a high of $1,899.4 yesterday. Gold had struck record high for five times last week and closed a little shy of $1,900/ounce yesterday.



On Tuesday, silver prices for September delivery shed by $1.03 (2.4%) to end at $42.29. Last week, silver gained 8.5%.

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, dropped by 0.17%.

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.

US stocks galloped across the board on Tuesday ignoring the housing sector report. Dow added more than 300 points to its kitty. A preliminary reading of China's August purchasing managers index rose to 49.8 from 49.3 in July. The data showed that activity in China contracted, but it was much better than what market expected. The German manufacturing PMI for August was unchanged from July at 52 and beat the 50.8 consensus forecast. The composite PMI index for the euro zone was 51.1, unchanged from a 22-month low in July, and better than the 50.3 consensus forecast.

New home sales in US fell 0.7% in July to a 298,000-unit pace. Most of the drop was in sales of homes priced between $400,000 and $750,000. Sales increased for homes priced below $150,000 and above $750,000.

At the MCX, gold prices for October delivery closed lower by Rs 497 (1.8%) at Rs 27,597 per ten grams. Prices rose to a high of Rs 28,284 per 10 grams and fell to a low of Rs 27,425 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed lower by Rs 1,991 (3.01%) at Rs 63,592/Kg. Prices opened at Rs 65,450/kg and fell to a low of Rs 63,251/Kg during the day's trading.