Yellow metal closes at a month high

Precious metal prices go up due to low dollar and firm crude prices

Precious metal prices ended moderately higher on Thursday, 12 January 2012 at Comex. Comex February gold futures prices on Thursday ended the U.S. day session firmer but down from the early-session high. Prices did hit another fresh four-week high earlier on. A lower U.S. dollar index and firmer crude oil prices earlier helped prices go up.

Gold for February delivery ended higher by $8.1 or 0.5%, to end at $1,647.7 an ounce on the Comex division of the New York Mercantile Exchange on Thursday. It was highest close for gold in a month. Last week, gold gained 3.2%. For the year 2011, gold rose 10%.



On Thursday, silver prices for March delivery rose 23 cents or 0.8% to end at $30.12. Last week, silver rose 2.7%. For the year 2011, silver shed almost 11%.

Gold was supported by news a day earlier that Chinese gold imports from Hong Kong surged to a record high in November for the fifth consecutive month. Mainland China's imports from Hong Kong climbed to 102,799 Kgs in November 2011 from 86,299 Kgs in October, 2011. Last year, China overtook India as the world's biggest market for gold, and the imports from Hong Kong are perceived as a proxy for overseas buying.

There are also reports of better physical demand for gold, especially from Asian countries, as the new year gets under way. Reports said with China's lunar new year approaching and with the recent declines that were seen in gold prices, the Chinese are stepping in to buy physical gold.

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

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.

Crude oil prices traded modestly higher, and are still trading above $100.00 a barrel. That's a bullish near-term factor for the precious metals. Though crude stayed higher for most part of the day, it slipped in the final few minutes of trading.

Fresh developments coming out of the European Union debt crisis on Thursday included successful auctions of Italian and Spanish debt. A European Central Bank meeting on Thursday saw no interest rate reduction, which was bullish for the Euro currency.

The decision by the European Central Bank (ECB) and Bank of England to keep interest rate targets unchanged came as little surprise, but the recognition of substantial downside risks to economic activity in the region by ECB President Draghi dampened sentiment.

Domestic data at Wall Street also checked in worse than expected. Retail sales during December increased by just 0.1% while sales less autos actually fell 0.2%. Neither was as strong as what had been widely anticipated. On the other hand, initial weekly jobless claims unexpectedly climbed to 399,000 and continuing jobless claims climbed to 3.63 million from 3.61 million. Market was expecting the initial claims figure to stay around 373,000 – more or less unchanged from last week.

At the MCX, gold prices for February delivery closed higher by Rs 8 (0.02%) at Rs 27,665 per ten grams. Prices rose to a high of Rs 27,816 per 10 grams and fell to a low of Rs 27,632 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed higher by Rs 163 (0.3%) at Rs 52,770/Kg. Prices opened at Rs 52,710/kg and rose to a high of Rs 53,400/Kg during the day's trading.