Bullions shed intra day gains

Gold and silver drops as strong dollar pressures commodities

Precious metals pared their intra day gains and ended lower on Tuesday, 06 September, 2011 at Comex. Prices shone following big sell-off at Wall Street despite a stronger than expected ISM service index data. But a strong dollar pressured the prices and the same ended lower for the day.



Gold for December delivery fell $3.6 or 0.2%, to end at $1,873.3 an ounce on the Comex division of the New York Mercantile Exchange on Tuesday. Earlier during the day, prices rose to a high of $1,923.7 during intra day trading. Last week, gold rallied 10%. It rose by $201 or 12% during the month of August.

On Tuesday, silver prices for December delivery fell $1.2 (2.8%) to end at $41.87. Last week, silver gained 5.2%. For the month of August, silver gained 4.1%.

Also providing support for bullions earlier during the day was news that the Swiss National Bank set a floor for the euro/Swiss franc exchange rate at 1.20 Swiss francs, vowing to buy “unlimited quantities” of euros to contain the Swiss franc.

Latest data at Wall Street showed that the U.S. services sector showed unexpected improvement in August from the month before, with the Institute for Supply Management's services index climbing to 53.3 last month from 52.7 in July. It was greater than the 51.0 that had been expected.

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, rose by 0.9%.

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 October delivery closed lower by Rs 516 (1.8%) at Rs 27,969 per ten grams. Prices rose to a high of Rs 28,744 per 10 grams and fell to a low of Rs 27,726 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed lower by Rs 1,789 (2.7%) at Rs 64,605/Kg. Prices opened at Rs 66,476/kg and fell to a low of Rs 64,400/Kg during the day's trading.