Precious metals lose some sheen as European leaders try to save euro

Bullions drop for third straight day

Precious metals ended lower for third straight day on Thursday, 21 July, 2011 at Comex. Gold prices dropped for the third time in thirteen sessions. Precious metals lost some of their sheen after European leaders agreed on a plan to try to contain the region's sovereign-debt crisis.

The yellow metal wavered between small gains and losses most of the session, supported in part by a lower dollar and doubts the European Union plan would be effective and enough to restore investors' faith in Europe and the euro. September silver also wavered between small gains and losses alongside gold, and ultimately followed gold lower.



Gold for August delivery fell $9.9 or 0.6%, to end at $1,587 an ounce on the Comex division of the New York Mercantile Exchange on Thursday.

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 12.1%. During 2010, gold ended higher by 30%, its tenth consecutive yearly gain.

On Thursday, silver prices for September delivery fell by $0.61 (1.5%) to end at $38.95. 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%.

European leaders met on Thursday and the meeting was seen as one of the last chances to quash the sovereign- debt crisis and save the euro. The draft plan in Europe would allow the European Financial Stability Facility to buy bonds in the secondary market while extending the maturity of loans and lowering interest rates, thus reducing the debt loads of the countries in trouble.

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 0.8%.

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.

Among economic data expected for the day, the U.S. government said new claims for unemployment benefits climbed a bit more than expected last week, ahead of Friday's monthly employment report.

Other economic data had an index of manufacturing activity in the Philadelphia region rebounding in July. Also, the Federal Housing Finance Agency reported home prices rose 0.4% in May. And the Conference Board's index of leading economic indicators climbed 0.3% in June, matching estimates.

At the MCX, gold prices for June delivery closed lower by Rs 216 (0.93%) at Rs 22,893 per ten grams. Prices rose to a high of Rs 23,167 per 10 grams and fell to a low of Rs 22,861 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed lower by Rs 1,104 (1.9%) at Rs 58,075/Kg. Prices opened at Rs 59,420/kg and fell to a low of Rs 57,775/Kg during the day's trading.