Precious metals continue to shine

Geo political tensions increase their appeal

Precious metals ended substantially higher on Tuesday, 22 February 2011 at Comex. Silver struck a new thirty-two year high. Both metals rallied as geo political tensions specially in the Middle East rocked the world. The same increased the appeal of precious metals as an alternate investment. Financial markets, including the New York Mercantile Exchange, were closed in observance of Presidents Day on Monday.



On Tuesday, gold for April delivery ended higher by $12.5 (0.9%) at $1,401.1 mark on the New York Mercantile Exchange. It was the seventh consecutive gains for gold. Last week, gold ended higher by 2.1%. For the year, gold has dropped by 1.5% 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 Tuesday, March Comex silver futures ended higher by $0.57 (1.8%) at $32.86. Prices gained 7.8% last week. Prices have shed 9% this year in January. For the year till date, silver is higher by 7.5%.

In FY 2010, silver ended higher by 83.7%.

Traders kept a close eye on the clashes between protesters and supporters of Gadhafi that intensified and spread to the capital, Tripoli, while unrest in Bahrain and other Middle Eastern countries continued. The revolt in Libya is the latest in a spate of political uprisings across the Mideast and North Africa in recent weeks.

In the currency market on Tuesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, stayed steady for most part of the day but garnered 0.2% at the end.

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 April delivery closed higher by Rs 57 (0.3%) at Rs 20,787 per ten grams. Prices rose to a high of Rs 20,849 per 10 grams and fell to a low of Rs 20,693 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 1,070 (2.1%) lower at Rs 49,220/Kg. Prices opened at Rs 50,150/kg and fell to a low of Rs 48,621/Kg during the day's trading.