Bullion metals shine considerably

Gains are checked as Fed hints at no further stimulus

Precious metals ended substantially higher on Thursday, 14 July, 2011 at Comex. Gold struck record high. Silver also shone. Precious metals' gains were checked after Federal Reserve Chairman Ben Bernanke finished his second day of testimony before Congress on Thursday and he said Fed officials are not ready yet to begin a new round of stimulus.



Gold for August delivery rose $3.8 or 0.2%, to end at $1,589.3 an ounce on the Comex division of the New York Mercantile Exchange on Thursday. It was eighth consecutive rise for the yellow metal and an all time high for the metal.

Gold ended June 2011 lower by 2.2%. It ended second quarter higher by 4.4%. For the first quarter of FY 2011, gold ended higher by 1.3%. On a year to date basis, gold prices are now higher by 11.5%. During 2010, gold ended higher by 30%, its tenth consecutive yearly gain.

On Thursday, silver prices for September delivery rose by $0.54 (1.4%) to end at $38.69. Silver ended the month of June lower by 9% followed by a 21% drop in May.

Silver prices ended the second quarter lower by 8%. Silver eked out a gain of 22% for the first quarter of this year. In FY 2010, silver ended higher by 83.7%.

Talks between President Barack Obama and congressional leaders ended Thursday with no deal to raise the debt ceiling or cut spending, but a backup plan was emerging as a way to keep the government from defaulting early next month. A warning from Standard & Poor's Ratings Services injected new urgency into the negotiations.

S&P said it had put U.S. sovereign ratings on formal credit watch and that, ”owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days.”

Latest data showed that new applications for unemployment benefits fell last week to the lowest level in three months, suggesting fewer layoffs in early July than usual. As per the Labor Department, initial claims for state benefits dropped 22,000 to a seasonally adjusted 405,000 in the week ended 9 July, 2011. That's the smallest amount of new applications since mid-April. The drop in claims helped give a boost to U.S. stocks in Thursday trades.

Market had expected new requests for jobless benefits to total 420,000. Claims in the prior week were revised up to 427,000 from an original reading of 418,000. The average of new claims over the past four weeks, meanwhile, dropped a lesser 3,750 to 423,250. The four-week average is seen as a more accurate a barometer of labor trends because it smoothes out week-to-week volatility in the data.

Another report showed that U.S. wholesale prices eased in June as the cost of energy posted the biggest monthly drop in two years. The Labor Department said its producer-price index fell a seasonally adjusted 0.4% last month, marking the first decrease in one year. The decline matched the forecast of market. Yet the core rate of wholesale inflation, which strips out the volatile food and energy categories, rose a higher-than-expected 0.3%. About half the increase stemmed from higher prices for light trucks. Investors and the Federal Reserve as a better gauge of inflationary pressure usually view the core index.

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, fell by almost 0.2%.

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.

At the MCX, gold prices for June delivery closed higher by Rs 81 (0.35%) at Rs 23,001 per ten grams. Prices rose to a high of Rs 23,083 per 10 grams and fell to a low of Rs 22,885 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed higher by Rs 918 (1.6%) at Rs 57,705/Kg. Prices opened at Rs 56,827/kg and rose to a high of Rs 58,632/Kg during the day's trading.