Precious metals plunge

Wednesday's loss pushes gold to register monthly loss for February

Bullion metal prices ended substantially lower on Wednesday, 29 February 2012 at Comex. Comex April gold and silver futures prices dropped sharply and quickly in mid-morning trading on Wednesday, with both markets closing sharply lower and near their daily lows on the day. The markets began to sell off around the same time U.S. Federal Reserve Chairman Ben Bernanke was delivering remarks to the U.S. Congress. Bernanke's remarks were cited by many as prompting the sell-off in the precious metals as the same boosted the dollar.



Gold for April delivery ended lower by $77.1 or 4.3%, to end at $1,711.3 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday. They fell to a low of $1,704.5 during intra day trading. Year-to-date, gold has gained 9.3%, while prices have shed 1.7% on the month of February 2012. Gold ended the month of January higher by 11%. For the year 2011, gold rose 10%.

On Wednesday, silver prices for March delivery ended lower by $2.56 or 6.9% at $34.58. So far this year, silver futures have gained 26%. Silver gained 6.5% during February 2012. For the month of January, silver gained 19%. For the year 2011, silver shed almost 11%.

Bullions ran into a barrage of selling that began after Fed Chairman Bernanke's prepared remarks for a semiannual FOMC report to the House Financial Services Committee. Bernanke's comments contained no surprise, but they also lacked any kind of reaffirmed commitment to an accommodative monetary policy. Bernanke said that keeping monetary stimulus is warranted but climbing energy costs would likely hike inflation temporarily and that the decline in the nation's jobless rate had been more rapid than expected.

Bullions also fell as upbeat U.S. economic data dulled safe-haven demand for the metal and as investors digested news that the European Central Bank offered a larger-than-expected amount of loans to the region's banks.

In the currency market on Wednesday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies rose by almost 0.7%. Most of its move has come against the euro. Earlier this morning the European Central Bank disclosed that it recently issued more than $700 billion in three-year loans to the continent's banks.

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, the Commerce Department reported that the economy expanded during the fourth quarter at a 3.0% clip, rather than the 2.8% pace posted in the advance report. Separately, the Chicago-area business barometer, which also is known as the Chicago PMI, accelerated to a reading of 64.0% in February from 60.2% in January

At the MCX, gold prices for April delivery closed lower by Rs 923 (3.2%) at Rs 27,952 per ten grams. Prices rose to a high of Rs 28,923 per 10 grams and fell to a low of Rs 27,752 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed lower by Rs 3,300 (5.2%) at Rs 59,630/Kg. Prices opened at Rs 62,670/kg and fell to a low of Rs 59,154/Kg during the day's trading.