Precious metals glitter

Weak dollar, follow through buying and Israel Iran tension push up prices

Bullion metal prices ended substantially higher on Thursday, 23 February 2012 at Comex. Comex April gold futures prices ended the U.S. day session with solid gains on Thursday, on good follow-through buying. Gold is being boosted this week by fresh safe-haven investment demand. The key factors were also in a bullish daily posture for the precious metals on Thursday, as the U.S. dollar index was lower and crude oil prices were solidly higher.

Gold for April delivery ended higher by $15 or 0.84%, to end at $1,786.3 an ounce on the Comex division of the New York Mercantile Exchange on Thursday. It reached a high of $1,789.3 during intra day trading.

Gold ended the month of January higher by 11%. For the year 2011, gold rose 10%.




On Thursday, silver prices for March delivery ended higher by $1.2 or 3.5% at $35.46. For the month of January, silver gained 19%. For the year 2011, silver shed almost 11%.

The gold market is seeing fresh support from the present stare-down between allies Israel and the U.S, and Iran. The recent news Iran has halted oil shipments to some European countries, to pre-empt an EU ban on Iranian oil imports, has been met with increasing focus in the media on the potential for Israel or U.S. military action against Iran. The rising tensions between Israel and the West, and Iran, are and likely will remain a major bullish fundamental factor for the safe-haven gold market. The Mid-East tensions have pushed the European Union sovereign debt crisis to the back burner this week.

In the currency market on Thursday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies fell by almost 0.3%. Most of the dollar's decline today has come against the euro. The euro's advance today comes despite the decision by European Union officials to revise lower their eurozone GDP forecast for 2012. Growth of 0.5% had been projected before, but a decline of 0.3% is now expected.

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.

Among domestic data awaited at Wall Street, new applications for unemployment benefits were unchanged last week, but they remained at a level consistent with an improved U.S. jobs market. The Labor Department said initial claims were flat at a seasonally adjusted 351,000. The level of claims is a gauge of whether layoffs are rising or falling. Market had estimated claims would increase to 353,000 in the week ended 18 February 2012. Claims from two weeks ago were revised up to 351,000 from 348,000.

At the MCX, gold prices for April delivery closed higher by Rs 267 (0.93%) at Rs 28,913 per ten grams. Prices rose to a high of Rs 28,944 per 10 grams and fell to a low of Rs 28,723 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed higher by Rs 1,420 (2.5%) at Rs 58,677/Kg. Prices opened at Rs 57,243/kg and rose to a high of Rs 58,784/Kg during the day's trading.