Precious metals turn extremely pale

Gold slips to four month lows while silver pares early gains

Precious metals ended the day in a weak mode on Thursday, 27 January 2011 at Comex. Gold prices surprisingly slipped to four month low levels even as economic data pained a mixed picture of the economy and also as the dollar lost grounds.



On Thursday, gold for February delivery ended lower by $14.6 (1.1%) at $1,318.4 mark on the New York Mercantile Exchange. Gold had wavered between small gains and losses earlier in the session, but seemed to regain enough footing to spend most of the morning in the black. Last week, gold ended lower by 1.4%. Gold prices have dropped 7.3% this year till date.

For the year of 2010, gold ended higher by 30%, its tenth consecutive yearly gain.

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 bullion metals have registered increase in prices despite strong dollar in recent times and vice versa.

On Thursday, March Comex silver futures ended lower by $0.10 (0.4%) at $27.03. Prices rallied more than 50 cents higher during the day. Prices lost 3.1% last week. Prices have shed 11.5% this year till date.

In FY 2010, silver ended higher by 83.7%.

In the currency market on Thursday, the dollar index ended fractionally down at the end of the trading day.

Among economic data expected for the day, the same checked in mixed in nature. Durable goods orders for December dropped 2.5% in addition to the 0.1% decline that was recorded in the prior month. Market was expecting a 1.5% increase. Excluding transportation, durable goods orders increased 0.5%, but that still is not as strong as the 0.6% increase that had been expected.

The latest initial jobless claims tally for the week ended 22 January 2011 came in at a three-month high of 454,000, which is well above the 410,000 claims that had been widely expected. Continuing claims came in at 3.99 million, up from 3.90 million. But pending home sales proved to be a much more positive surprise. They climbed 2.0% when a 0.5% decline had been expected.

Bullion metal prices are expected to continue with their joyride in the coming months with gold expected to reach between $1,600 and $1,700 an ounce and silver likely to attempt to test highs in the $50 area.

At the MCX, gold prices for February delivery closed lower by Rs 221 (1.1%) at Rs 19,678 per ten grams. Prices rose to a high of Rs 20,050 per 10 grams and fell to a low of Rs 19,651 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 173 (0.4%) higher at Rs 41,920/Kg. Prices opened at Rs 41,850/kg and rose to a high of Rs 42,684/Kg during the day's trading.