Bullions sparkle

Mixed economic data, lower dollar and uncertainties regarding Greece impart the shine

Precious metals ended substantially higher on Thursday, 03 November 2011 at Comex. The uncertainty about what would happen in Greece caused precious metals to rally today. Mixed economic data at Wall Street and surprise interest rate cut by ECB also affected prices.

Gold for December delivery ended higher by $35.5 or 2.1%, to end at $1,765.1 an ounce on the Comex division of the New York Mercantile Exchange on Thursday. That was gold's highest settlement in more than two months. Last week, gold gained 6.8%. For the month of October, gold gained 6.3%. It registered a rise of 8% for the third quarter ending September.



On Thursday, silver prices for December delivery added $0.55 or 1.6% to end at $34.5. Last week, silver gained 13%. For the month of October, silver gained 14%. It registered a drop of 14% for the third quarter ending September.

Thursday began with solid gains at Wall Street after the ECB surprised markets with a quarter-point cut to its key lending rate to 1.25% amid deteriorating economic data from the euro region. In a press conference, new ECB President Mario Draghi suggested the euro area could relapse into a mild recession by the end of the year.

The political troubles of Greece's Prime Minister George Papandreou mounted on Thursday after Greece's finance minister publicly opposed a plan to tie a referendum to the nation's membership in the euro zone. Its downturn was mostly owed to a bounce by the euro as participants come to believe that Greece will abandon its eurozone bailout referendum and acquiesce to the agenda of other eurozone members.

U.S. data showed new applications for jobless benefits dropped back below the 400,000 level. It fell by 9,000 to 397,000. Also, the Institute for Supply Management said its gauge of services-sector activity slid to 52.9% in October from 53% in September, showing the sector was still expanding but disappointing economists' projections. Meanwhile, factory orders for September increased by 0.3%, which is a positive surprise since many had expected a 0.2% decline.

In the currency market on Thursday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies climbed up initially but then pared gains and fell by almost 0.4% going into close.

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.

A day earlier, on Wednesday, the Fed cut its growth outlook for US economy sharply for this year, 2012 and 2013. Ben Bernanke also said the Fed is prepared to engage in further accommodation. The Fed's board members and presidents now see 2011 gross domestic product between 1.6% and 1.7%, 2012 GDP between 2.5% and 2.9%, 2013 GDP between 3% and 3.5% and 2014 GDP between 3% and 3.9%.

At the MCX, gold prices for December delivery closed higher by Rs 399 (1.44%) at Rs 27,989 per ten grams. Prices rose to a high of Rs 28,022 per 10 grams and fell to a low of Rs 27,592 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed higher by Rs 618 (1.1%) at Rs 56,726/Kg. Prices opened at Rs 56,096/kg and rose to a high of Rs 57,200/Kg during the day's trading.