Precious metals turn moderately pale

Prices drop as dollar strengthens for the first time in a week

Precious metals ended lower on Thursday, 10 February 2011 at Comex. Prices oscillated between red and green zone for some time but traded lower for most part of the day. Prices dropped as the dollar turned strong today. Prices also were hammered following unconfirmed news that Egypt President Hosni Mubarak will step down.



On Thursday, gold for April delivery ended lower by $3 (0.2%) at $1,362.5 mark on the New York Mercantile Exchange. Prices fell to a low to $1,351.4 during intra day trading. Prices inched up in the black for a brief time when doubts came over Mubarak's impending resignation news. Last week, gold ended higher by 0.6%. For the year, gold has dropped by 4.2% 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 $0.18 (0.6%) at $30.09. Prices gained 2.9% last week. Prices have shed 9% this year in January. For the year till date, silver has shed 2%.

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, strengthened substantially for the first time in a week and rose by 0.6%.

The Labor Department in US reported on Thursday, 10 February 2011 that new applications for regular state unemployment-insurance benefits moved below the closely watched level of 400,000 claims. Initial claims for these benefits fell 36,000 to a seasonally adjusted 383,000 in the week ended 5 February, hitting the lowest seen since July 2008. The four-week average of new claims, which some market look to because it smoothes out some volatility, fell 16,000 to a total of 415,500.

Continuing claims, which reflect the number of people already receiving unemployment compensation, also declined, down 47,000 to 3.89 million in the week ended 29 January. The four-week average of these continuing claims remained at 3.93 million.

Last weekend, Egypt's regime met for the first time with representatives of the banned Muslim Brotherhood. President Hosni Mubarak has hung onto power despite the protests that have called for his resignation.

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 27 (0.13%) at Rs 20,427 per ten grams. Prices rose to a high of Rs 20,485 per 10 grams and fell to a low of Rs 20,325 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 126 (0.3%) lower at Rs 45,737/Kg. Prices opened at Rs 45,760/kg and fell to a low of Rs 45,310/Kg during the day's trading.