Mixed finish for bullions

Silver drops while gold ends at two week high

Precious metal prices ended mixed on Wednesday, 04 January 2012 at Comex. While gold prices ended at two-week highs, silver prices tuned pale. The gold market was under mild selling pressure in early trading on Wednesday, but traders stepped in to buy that weakness. The dollar stayed strong on Wednesday affecting commodities.

Gold for February delivery ended higher by $12.2 or 0.8%, to end at $1,612.7 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday. The metal earlier veered between small gains and losses, but gathered steam as U.S. stocks started their trading day on the red. Prices shed 2.4% last week. For the year 2011, gold rose 10%.



On Wednesday, silver prices for March delivery shed $0.47 or 1.6% to end at $29.1. Last week, silver prices dropped 4%. For the year, silver shed almost 11%.

In the currency market on Wednesday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies rose by almost 0.5%. A barometer of economic and financial sentiment, the euro, continued to trade with weakness. It was down 0.9% against the greenback on Wednesday. For the year 2011, the dollar index had gained 1.6%.

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.

Weak economic data and the prospects for more fiscal stimulus have driven gold to record highs last year, as investors sought a hedge against falling equities and as some fear potential for inflation and currency devaluation, particularly the U.S. dollar debasement.

Among economic data expected for the day, the Commerce Department reported a 1.8% rise in factory orders for November 2011, compared with an anticipated rise of 1.9%.

At the MCX, gold prices for February delivery closed higher by Rs 196 (0.7%) at Rs 27,852 per ten grams. Prices rose to a high of Rs 27,888 per 10 grams and fell to a low of Rs 27,540 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed lower by Rs 348 (0.65%) at Rs 52,761/Kg. Prices opened at Rs 53,000/kg and fell to a low of Rs 52,260/Kg during the day's trading.