Precious metals turn pale

Strong dollar and higher US stocks pushed bullion metal prices lower

Precious metal prices ended substantially lower on Wednesday, 02 June 2010 at Comex. Stronger dollar and higher US stocks pushed back bullion metal prices.

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 Wednesday, gold for August delivery ended at $1,222.6 an ounce, lower by $4.3 (0.4%) an ounce on the New York Mercantile Exchange. Prices dropped by almost 1% during intra day trading. Prices had touched an all time high of $1,249.7 on 14 May 2010. Gold for June delivery had settled above $1,200 in early December 2009, only to pull back to $1,172 area and dip as much as the $1,050 vicinity in early February 2010.

Last week, gold ended higher by 3.3%. Gold ended May higher by 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 11.3%.

On Wednesday, July Comex silver futures ended lower by 23.6 cents (1.3%) at $18.315 an ounce. Last week, silver ended higher by 4.3%. For May, silver shed 1.1%. 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 5.4%.

In the currency market on Wednesday, the dollar stayed relatively strong for almost the entire day but the dollar index ended the day with a 0.2% loss.

Among economic reports for the day, the National Association of Realtors reported that pending home sales index rose 6% in April after an upwardly revised 7.1% increase in March. The pending sales index is at the highest level since October, just before a previous tax credit expired. The index is up 22% compared with April 2009. Buyers rushed to sign sales contracts on previously owned homes in US in April before a tax subsidy expired. The report gave US equities a major boost today.

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 August delivery closed lower by Rs 79 (0.42%) at Rs 18,637 per ten grams. Prices rose to a high of Rs 18,850 per 10 grams and fell to a low of Rs 18,610 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 372 (1.25%) lower at Rs 29,231/Kg. Prices opened at Rs 29,597/kg and fell to a low of Rs 29,083/Kg during the day's trading.