Gold ends higher amid strong dollar

Silver continues to turn pale

Precious metals ended mixed once again on Thursday, 06 May at Comex. Yellow metal ended substantially higher at Comex even as US equities and other commodities like oil plunged as European sovereign debt concerns failed to abate. However, silver prices tripped.

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.

On Thursday, gold for June delivery ended at $1,197.3 an ounce, higher by $22.3 (1.9%) an ounce on the New York Mercantile Exchange. It was a five-month high level for gold. It hovered around the $1,200 mark for the entire day. Gold for June delivery settled above $1,200 in early December, only to pull back to $1,172 area and dip as much as the $1,050 vicinity in early February. Last week, gold ended higher by 2.3%. For the month of April, gold ended higher by 6%. For the first quarter of this year, gold rose by 1.7%, its sixth quarterly rise. On a year to date basis, gold is higher by 9.1%.

On Thursday, July Comex silver futures ended lower by 2 cents (0.15%) at $17.15 an ounce. This is the lowest price for silver since mid March. Last week, silver ended higher by 2.4%. For the month of April, silver ended higher by 4.1%. For the first quarter of this year, silver rose by 3%. On a year to date basis, silver is higher by 1%.

A bailout package worth some $146 billion for Greece was announced over the weekend, but it was not enough to restore investors' confidence about the euro-zone countries and the euro and investors again sought gold as a hedge against currency fears. In the midst of financial turmoil and on the eve of key votes in Europe on Greece's bailout package, US stocks almost collapsed today.

In the currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six currencies, rose by 0.5%. Most of the greenback's gain came against the euro, which remained weak in the wake of the European Central Bank's decision to keep its target interest rate unchanged at 1%, as expected. News that Greece passed planned austerity measures in a nonbinding preliminary vote failed to help the euro, too.

Among economic reports for the day, The Labor Department in US reported on Thursday, 06 May 2010 that the number of first-time applications for state unemployment benefits fell by 7,000 last week to a seasonally adjusted 444,000. Initial claims fell for the third straight week after filings bumped higher in early April due to administrative backlogs and seasonal distortions around the Easter holiday and the end of the quarter.

Separately, the Labor Department in US reported on Thursday, 06 May 2010 that the productivity of U.S. nonfarm businesses slowed in the first quarter from 6.3% to 3.6% annual rate. The 3.6% rise in productivity for the first quarter was better than the 3.1%.

Gold had ended FY 2009 higher by 24%. Silver futures had ended 2009 up 50%. The dollar index had lost 4.2% against its counterparts last year.

Last year, after hitting a low at $807.30 per ounce on 15 January 2009, gold futures rallied almost 51% to hit an all-time high at $1217.40 per ounce during early December of 2009 but fell from those levels at the end. Silver futures had hit a low at $10.42 on 15 January 2009 and hit a high at $19.30 per ounce on 2 December 2009. Like gold, silver also ended lower than its all time high level.

At the MCX, gold prices for June delivery closed higher by Rs 449 (2.6%) at Rs 17,763 per ten grams. Prices rose to a high of Rs 17,800 per 10 grams and fell to a low of Rs 17,295 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 161 (0.6%) higher at Rs 27,464/Kg. Prices opened at Rs 27,280/kg and rose to a high of Rs 27,610/Kg during the day's trading.