Boosted by dollar weakness and rising crude, gold gains more than 2% for the week
Precious metals ended higher today, Friday, 21 December, 2007 after the dollar slipped against almost all its rival currencies barring yen. The greenback fell despite a strong economic report suggesting higher consumer spending in the US. Though this suggested that Fed might not be heading for another interest rate cut, it pushed up crude prices considerably higher today. Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength.
Comex Gold for February delivery rose $12.2 (1.5%) to close at $815.4 an ounce on the New York Mercantile Exchange today. For the week, gold gained $17.4/ounce (2.2%). Last week, prices rose by almost 0.3% ($2.2/ounce). On, 7 November, prices had touched $848/ounce. It was the highest price after a record $873 on 21 January, 1980.
Comex Silver futures for March delivery rose 14.8 cents (1%) to $14.488 an ounce. Silver prices have been rallying since the past three days as copper prices rallied. Prices touched 26 year high on 7 November, after reaching $16.275. The metal has climbed 12% this year.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
In the currency market today, The dollar gained on the yen but gave up a bit of ground to other major rivals in thin pre-holiday market conditions.
In the energy market, oil prices ended marginally lower today after going through some volatile session. Price closed lower by 20 cents at $91.04/barrel. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, edged down 0.1% at 77.70.
Gold had climbed 27% this year till date as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Dollar is still 9% down against the euro this year.
In 2006, silver had jumped 46% while gold gained 23%.
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