Precious metals shine

Prices rise on inflationary pressures

Precious metals ended higher on Thursday, 09 June, 2011 at Comex. Prices rose due to inflationary pressures following comments from European Central Bank President Jean-Claude Trichet. The dollar turned strong later in the day paring earlier losses.

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 rose $4 or 0.3%, to end at $1,542.7 an ounce on the Comex division of the New York Mercantile Exchange on Thursday. Last week, gold gained 0.3%. Gold ended the month of May lower by 1.2%.

For the year till date, gold is up by 7.9%. 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 rose $0.80 (2.2%) to end at $37.42. Last week, silver lost 4.4%. Silver ended the month of May lower by 21%.

Silver prices have gained 18% 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 was up today, but off of its session high. After trading with moderate weakness this morning, it was up against the yen, sterling pound, and the euro. The greenback began to garner support as European Central Bank President Trichet stated the need to remain vigilant in an environment of upward inflation pressure and economic uncertainty. The ECB opted to keep its target interest rate unchanged at 1.25%.

Economic data showed today that the U.S. trade deficit narrowed sharply in April as imports from Japan were curtailed due to the earthquake. As per the Commerce Department, the nation's trade deficit narrowed 6.7% in April to $43.7 billion from a revised $46.8 billion in March.

Separately, the government reported a slight rise in those applying for unemployment benefits, with new claims up 1,000 to 427,000 last week.

At the MCX, gold prices for June delivery closed higher by Rs 66 (0.3%) at Rs 22,589 per ten grams. Prices rose to a high of Rs 22,683 per 10 grams and fell to a low of Rs 22,515 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed higher by Rs 1,072 (1.95%) at Rs 55,847/Kg. Prices opened at Rs 54,988/kg and rose to a high of Rs 56,136/Kg during the day's trading.