Mixed finish for bullions as gold drops but silver rises

Gold extends drop in electronic trading following FOMC meet

Precious metals ended mixed on Tuesday, 13 December 2011 at Comex. Yellow metal prices turned pale as the dollar headed up substantially higher. Gold prices fell but silver rose. But Comex gold futures also sold off sharply in after-hours U.S. electronic trading and pushed to a fresh seven-week low following the Fed's FOMC meeting that gave no hints of any further quantitative easing of U.S. monetary policy. That helped to push the U.S. dollar index further higher and to a fresh two-month high, which in turn put more downside price pressure on gold.



Gold for February delivery ended lower by $5.1 or 0.3%, to end at $1,663.1 an ounce on the Comex division of the New York Mercantile Exchange on Tuesday. Prices were trading higher by 0.1% earlier during the day. During electronic trading, prices dropped by almost $30 an ounce. Last week, gold lost 2%.

On Tuesday, silver prices for March delivery rose $0.26 or 0.8% to end at $31.26. Last week, silver lost 1.3%. For the month of November, silver lost 4.7%.

In the currency market on Tuesday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies rose by about 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.

US stock market was sporting an impressive gain in the early going, but the confluence of technical resistance, another retreat by the euro, and disappointment over the Fed's failure to give additional consideration to further quantitative easing forced stocks lower. In the latest FOMC meet, the Fed recognized that strains in global financial markets continue to pose significant downside risks to the economic outlook. To little surprise, the Fed kept target interest rate in the range of 0.00% to 0.25% and remained committed to extending the average maturity of its holdings.

The Commerce Department in US reported that the nation's retail sales climbed just 0.2% in November. Both total sales and sales less autos increased by 0.2%, but total sales had been generally expected to increase by 0.6%, while sales less autos had been generally expected to post a 0.5% increase. Other reports on Tuesday on the U.S. economy had the Commerce Department reporting that inventories at U.S. businesses rose 0.8% in October, with business sales up 0.7%.

At the MCX, gold prices for February delivery closed higher by Rs 24 (0.08%) at Rs 28,871 per ten grams. Prices rose to a high of Rs 29,027 per 10 grams and fell to a low of Rs 28,780 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed higher by Rs 435 (0.8%) at Rs 56,578/Kg. Prices opened at Rs 56,198/kg and rose to a high of Rs 57,400/Kg during the day's trading.