Bullions continue to shed glitter

Prices drop for fifth straight day

Precious metals ended lower for fifth straight session on Wednesday, 28 December 2011 at Comex. Prices dropped amid a strong dollar and thin level of trading. Prices also responded to bearish news from Europe, China and India, which produced fears of weakening demand for the precious metal

Gold for February delivery ended lower by $31.4 or 2%, to end at $1,564.1 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday. Prices have shed 3.3% in past five sessions. Last week, the yellow metal rose 0.5%.



On Wednesday, silver prices for March delivery fell $1.51 or 5.2% to end at $27.23. Last week, silver prices dropped 1.9%.

In the currency market on Wednesday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies rose by almost 0.8%.

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 bullions have registered increase in prices despite strong dollar in recent times and vice versa.

Today's news that spooked investors included reports that deposits at the European Central Bank hit a record high EUR452 billion and that the central bank's balance sheet has expanded to a record EUR2.73 trillion.

Italy's 10-year note yield rose, close to the 7% level deemed as unsustainable. The euro fell to 1.2924 against the U.S. dollar. Italy's short-term debt costs fell at auction, boosted by the government's recent austerity plan and inexpensive liquidity from the European Central Bank. The ECB said in a statement that its lending to euro-area banks leapt last week as the Frankfurt-based ECB strived to keep credit moving amidst the region's debt crisis. But Italy could be looking at a harder sale on Thursday when it sells long-term debt.

At the MCX, gold prices for February delivery closed lower by Rs 370 (1.3%) at Rs 27,281 per ten grams. Prices rose to a high of Rs 27,720 per 10 grams and fell to a low of Rs 27,150 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed lower by Rs 2,075 (3.93%) at Rs 50,636/Kg. Prices opened at Rs 52,806/kg and fell to a low of Rs 50,281/Kg during the day's trading.