Bullions applaud central bank's move to boost liquidity

For November, gold gains but silver drops

Precious metals ended higher on Wednesday, 30 November 2011 at Comex. Other than a weak dollar, stocks and commodities worldwide applauded news that the Federal Reserve and five other central banks together moved to ease the flow of funds to banks hit by Europe's debt crisis.

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 December delivery ended higher by $32.1 or 1.9%, to end at $1,745.5 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday. It was highest close for gold in two weeks. Last week, the yellow metal lost 2.3%. For the month of November, gold gained 1.2%.

On Wednesday, silver prices for December delivery rose $0.88 or 2.8% to end at $32.73. Last week, silver lost 4.3%. For the month of November, silver lost 4.7%.

Central banks in Europe and in Japan, Switzerland, Canada, the U.K., and the U.S. announced Wednesday a coordinated action to boost liquidity for banks as European institutions have shown signs of growing duress. The central bankers agreed to lower the pricing on existing temporary U.S. dollar liquidity swap arrangements by 50 basis points, or 0.50%, putting the new rate as the U.S. dollar overnight index swap rate plus 50 basis points.

In the currency market on Wednesday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies dropped by almost 0.6%.

At Wall Street on Wednesday, data helped reinforce the upbeat mood among market participants. The latest ADP Employment Change showed that private payrolls increased by 205,000 during November. An increase of only 125,000 had been generally expected.

The Chicago PMI improved to 62.6 in November from 58.4 in the prior month when many had expected it to slip to 57.5. Pending home sales for October spiked by 10.4%. An incremental increase of 0.1% had been expected.

At the MCX, gold prices for February delivery closed higher by Rs 342 (1.2%) at Rs 29,347 per ten grams. Prices rose to a high of Rs 29,420 per 10 grams and fell to a low of Rs 28,998 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed higher by Rs 1,038 (1.83%) at Rs 57,787/Kg. Prices opened at Rs 56,525/kg and rose to a high of Rs 58,059/Kg during the day's trading.