Steady finish for precious metals

Prices remain cautious ahead of FOMC statement

Precious metals stayed steady on Wednesday, 26 January 2011 at Comex. Gold remained near unchanged mark while silver rose. Prices traded near unchanged mark for most part ahead of Federal Reserve's comments over its FOMC meet. But bullion metals rallied in after hours traded following Fed's announcement.

On Wednesday, gold for February delivery ended almost unchanged near the $1,330 mark on the New York Mercantile Exchange. Last week, gold ended lower by 1.4%. Gold prices have dropped 6.2% 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 Wednesday, March Comex silver futures ended higher by $0.23 (0.9%) at $27.13. Prices lost 3.1% last week. Prices have shed 11% this year till date.

In FY 2010, silver ended higher by 83.7%.

In the currency market on Wednesday, The dollar index saw some immediate weakness following the FOMC statement, but losses quickly turned to gains before easing back towards the flat line.

The latest FOMC statement didn't contain any major surprises. The FOMC left rates unchanged at 0.00-0.25% and maintained the expansion of its asset purchase program, with a continued intention to purchase $600 bln of longer-term Treasury securities by the end of Q2 2011.

The FOMC noted that information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions. It also said that it continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

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.