Precious metals kick off New Year on a bright note

Weak dollar and substantially higher crude oil prices support prices

Precious metal prices kicked off the new year 2012 on a brighter note as they ended higher on Tuesday, 03 January 2012 at Comex. Prices were supported with the help of a weak dollar and substantially higher crude oil prices. Geopolitical concerns surrounding Iran and potential for conflict in the Strait of Hormuz also brought some safe-haven demand for gold.

Gold for February delivery ended higher by $33.7 or 2.2%, to end at $1,600.5 an ounce on the Comex division of the New York Mercantile Exchange on Tuesday. Prices rose to a high of $1,608.7 during intra day trading. Prices shed 2.4% during the week. For the year, gold rose 10%.



On Tuesday, silver prices for March delivery rose $1.66 or 5.9% to end at $29.57. Last week, silver prices dropped 4%. For the year, silver shed almost 11%.

In the currency market on Tuesday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies fell by almost 0.7%. For the year, the dollar index 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.

US stocks kicked off the new year 2012 with a bang on Tuesday, 03 January 2012. Stocks are holding their gains in the wake of a couple of doses of economic data. Both proved better than expected. Wall Street was closed on Monday, 02 January 2012 in lieu of New Years Holiday.

Among economic data expected for the day, the Commerce Department reported today that outlays for U.S. construction projects rose 1.2% in November, 2011. The gain in construction spending in November was above expectations of a 0.5% gain. However, October construction spending was revised down to show a 0.2% decline from the previous estimate of a 0.8% gain. In November, spending on private construction rose 1.0% and residential construction rose 2.0%. Spending on public projects rose 1.7%

Separate report showed that manufacturing activity accelerated in December, highlighting the U.S. economy's momentum heading into the New Year. The Institute for Supply Management's manufacturing index for December climbed to 53.9% from 52.7% in November, which is a six-month high. Market had anticipated a 53.0% reading. Any reading above 50% indicates expansion. Of the 18 industries surveyed, nine reported growth while nine reported contraction.

Crude futures for February delivery on Tuesday rose $4.13, or 4.2%, to end at $102.96 a barrel on the New York Mercantile Exchange.

At the MCX, gold prices for February delivery closed higher by Rs 274 (1%) at Rs 27,656 per ten grams. Prices rose to a high of Rs 27,779 per 10 grams and fell to a low of Rs 27,414 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed higher by Rs 1,779 (3.5%) at Rs 53,109/Kg. Prices opened at Rs 51,493/kg and rose to a high of Rs 53,500/Kg during the day's trading.