Precious metals witness sharp gains

Investors flock to bullions on growing concerns over US economy

Precious metals ended at record highs on Tuesday, 02 August 2011 at Comex. Gold prices soared with silver following it as investors flocked to precious metals following a report from the Commerce Department that consumer spending in US dropped in June. Prices rose despite a s steady dollar. Ongoing concerns about the sluggish pace of the economy's recovery pushed prices higher.



Gold for December delivery rose $22.8 or 1.4%, to end at $1,644.5 an ounce on the Comex division of the New York Mercantile Exchange on Tuesday. During intra day trading, prices rose to a high of $1,647.8.

On Tuesday, silver prices for September delivery rose by $0.78 (2%) to end at $40.09.

The latest dose of data in US indicated that personal spending during June unexpectedly declined 0.2%, the first decline in nearly two years. The Commerce Department reported that personal income increased a seasonally adjusted 0.1%, the smallest gain since last November. Individual savings rate for June jumped to its highest level of 2011, 5.4% of disposable income, up from 5% in May.

Inflation, meanwhile, also declined in June based on the latest reading from the personal consumption expenditure price index. The index decreased 0.2%, likely reflecting a drop in oil prices.

Over the past year, the PCE inflation index has climbed 2.6%. Yet the more closely followed core PCE, which excludes volatile food and energy costs, rose 0.1%, suggesting prices for many other consumer goods remain elevated. Core PCE has risen 1.3% in the past 12 months. The government also revised data on consumer spending in May to show an increase of 0.1%. Personal income for May was revised down to an 0.2% increase instead of an originally reported 0.3%

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, rose by almost 0.2%.

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.

At the MCX, gold prices for June delivery closed higher by Rs 299 (1.3%) at Rs 23,806 per ten grams. Prices rose to a high of Rs 23,849 per 10 grams and fell to a low of Rs 23,491 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed higher by Rs 1,201 (2.1%) at Rs 59,326/Kg. Prices opened at Rs 58,350/kg and rose to a high of Rs 59,529/Kg during the day's trading.