Precious metals shine

Prices end substantially higher due to a host of factors

Precious metals ended substantially higher on Thursday, 17 February 2011 at Comex. Prices rose due to continuing tensions in the Middle East, lower dollar and the consumer price index data.



On Thursday, gold for April delivery ended higher by $10 (0.7%) at $1,385.1 mark on the New York Mercantile Exchange. Last week, gold ended higher by 0.8%. For the year, gold has dropped by 2.6% 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 pared early gains and ended higher by $0.94 (2.8%) at $31.57. Prices gained 4.4% last week. Prices have shed 9% this year in January. For the year till date, silver is higher by 2.6%.

In FY 2010, silver ended higher by 83.7%.

In the currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, dropped by 0.22%.

Economic data on Thursday showed that the prices that American consumers pay for goods and services rose a seasonally adjusted 0.4% in January, mainly because of higher gas and grocery expenses. But “core” consumer prices rose a lesser 0.2%. The core data strips out volatile food and energy costs that can make overall inflationary pressure in the economy to seem higher or lower than it actually is. Market had forecast the consumer price index to rise 0.3% overall, with a 0.1% increase in the core rate.

The Labor Department in US reported on Thursday, 17 February 2011 that new applications for jobless benefits rose by 25,000 to 410,000 last week, reflecting choppy conditions in a still-tepid U.S. labor market. The four-week average of new claims rose a scant 1,750 to 417,750. The moving average is considered a more accurate barometer of employment trends because it smooths out fluctuations in the data caused by special factors such as holidays or bad weather.

Market had expected initial claims in the week ended 12 February to rise to a seasonally adjusted 400,000.

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 10 (0.05%) at Rs 20,516 per ten grams. Prices rose to a high of Rs 20,548 per 10 grams and fell to a low of Rs 20,481 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 916 (1.97%) higher at Rs 47,179/Kg. Prices opened at Rs 46,300/kg and rose to a high of Rs 47,279/Kg during the day's trading.