Bullions end winning streak

Prices drop considerably in tandem with other commodities

Precious metals ended their seven-day winning streak and ended lower on Thursday, 23 June, 2011 at Comex. Prices fell in tandem with other commodities as crude prices plunged and dollar strengthened considerably.

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.



Gold for August delivery fell $32.9 or 2.1%, to end at $1,520.4 an ounce on the Comex division of the New York Mercantile Exchange on Thursday. Last week, gold ended higher by 0.6%.

For the year till date, gold is up by 7.1%. For the first quarter of FY 2011, gold ended higher by 1.3%. During 2010, gold ended higher by 30%, its tenth consecutive yearly gain.

On Thursday, silver prices for July delivery fell by $1.74 (4.7%) to end at $35. Last week, silver fell 1.6%. Silver ended the month of May lower by 21%.

Silver prices have gained 11.6% until date this year. Silver eked out a gain of 22% for the first quarter of this year. In FY 2010, silver ended higher by 83.7%.

In the currency market on Thursday, the dollar index, which, measures the strength of the dollar against a basket of six other currencies, rose by almost 0.7%. The dollar remained strong for the entire day.

In order to ease current crude prices, International Energy Agency announced today that its member countries would release a total 60 million barrels of oil, with the United States kicking in 30 million of the barrels. August crude fell $3.85 or 4% to $91.55 a barrel on the New York Mercantile Exchange after tapping a low of $89.69.

The Fed, yesterday, downgraded its assessment of the U.S. economy's performance, but gave no indication policymakers intend to take new steps to boost growth and jobs. Given low resource utilization rates and a subdued outlook for inflation, the FOMC left the federal funds target rate at 0.00% to 0.25%, and is expected to keep the target at exceptionally low levels for an extended period, as it has stated so many times before. It also kept its plans unchanged regarding the end of the second round of quantitative easing.

The Federal Reserve cut its economic growth forecast for the second time this year, reducing its estimate of 2011 gross domestic product growth to a range of 2.7% to 2.9%, down from 3.1% to 3.3% in April and 3.4% to 3.9% in January. It's also cut its 2012 forecast from this lower base, to a level showing 3.3% to 3.7% growth from the 3.5% to 4.2% growth that the Fed forecast in April.

The Labor Department in US reported on Thursday, 23 June 2011 that initial claims rose by 9,000 to a seasonally adjusted 429,000 in the week ended 18 June 2011. Initial claims from two weeks ago were revised up to 420,000 from an originally reported 414,000. Market had expected initial claims to fall to 415,000 for the latest week. Meanwhile, the average of new claims over the past four weeks was flat at 426,250. The monthly average is considered a more accurate measure of employment trends.

Among other economic data, the Commerce Department reported that sales of new U.S. homes slipped 2.1% in May after a steep downturn in activity in the Northeast. Sales of new homes fell to a seasonally-adjusted annual rate of 319,000 in May against an expected figure of 305,000.

At the MCX, gold prices for June delivery closed lower by Rs 325 (1.4%) at Rs 22,411 per ten grams. Prices rose to a high of Rs 22,720 per 10 grams and fell to a low of Rs 22,371 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed lower by Rs 1,917 (3.7%) at Rs 52,721/Kg. Prices opened at Rs 54,550/kg and fell to a low of Rs 52,452/Kg during the day's trading.