Precious metals turn pale

Prices drop as dollar heads up

Precious metals ended with losses on Wednesday, 02 February 2011 at Comex. Prices dropped as the dollar shed all of its prior day's losses and had a strong rally thereby reducing the appeal of precious metals as an alternate investment.




On Wednesday, gold for April delivery ended lower by $8.2 (0.6%) at $1,332.1 mark on the New York Mercantile Exchange. Last week, gold ended almost flat. Gold lost 6.1% in January 2011. For the year, gold has dropped by 7.1% 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 lower by $0.23 (0.8%) at $28.29. Prices gained 1.8% last week. Prices have shed 9% this year in January. For the year till date, silver has shed 8.6%.

In FY 2010, silver ended higher by 83.7%.

In the currency market on Wednesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by 0.8% initially but ended the day with a 0.1% gain.

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 110 (0.54%) at Rs 20,021 per ten grams. Prices rose to a high of Rs 20,149 per 10 grams and fell to a low of Rs 19,980 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 370 (0.84%) lower at Rs 43,411/Kg. Prices opened at Rs 43,875/kg and fell to a low of Rs 43,257/Kg during the day's trading.