Precious metals rise substantially higher

Silver rises to fresh thirty-two year high

Precious metals ended considerably higher on Tuesday, 01 March 2011 at Comex. Geo-political tensions and comments by the Fed Chairman took prices higher to fresh highs. Prices rose despite a steady dollar.



On Tuesday, gold for April delivery ended higher by $21.3 (1.5%) at $1,431.2 mark on the New York Mercantile Exchange. Last week, gold ended higher by 1.5%. For the year, gold has risen by 0.7% till date.

Gold ended the month of February higher by 5.6% following a 6.1% drop in January 2011. For the year of 2010, gold ended higher by 30%, its tenth consecutive yearly gain.

Gold's gains picked up after U.S. Federal Reserve Chairman Ben Bernanke told Congress that the increase in inflation from rising commodities prices will be modest and temporary.

On Tuesday, March Comex silver futures ended higher by $0.61 (1.8%) at $34.43. That was a fresh thirty-two week high for silver. Prices gained 1.9% last week. Prices gained more than 20% in February 2011 after shedding 9% this year in January. For the year till date, silver is higher by 12.3%. In FY 2010, silver ended higher by 83.7%.

Traders kept a close eye on the clashes in the Mid East region. The revolt in Libya is the latest in a spate of political uprisings across the Mideast and North Africa in recent weeks. Pressure on embattled Libyan leader Moammar Gadhafi intensified on Tuesday, with international governments including the U.S. imposing sanctions and calling for him to step down immediately.

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.

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 the whole day but ultimately gained 0.3%. The index lost 1% in February 2011 and is down by 2.2% on a y-t-d basis.

Economic data at Wall Street showed today a stronger-than-expected February ISM Manufacturing Index of 61.4, which is the highest reading since 2004. Also, construction spending for January fell 0.7%, though. It had been broadly expected to drop 0.6%.

At the MCX, gold prices for April delivery closed higher by Rs 141 (0.7%) at Rs 21,064 per ten grams. Prices rose to a high of Rs 21,097 per 10 grams and fell to a low of Rs 20,842 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 478 (0.93%) higher at Rs 51,591/Kg. Prices opened at Rs 51,047/kg and rose to a high of Rs 51,779/Kg during the day's trading.