Gold prices end marginally lower after striking another record high
Precious metal prices ended mixed today, Tuesday, 29 January, 2008 as gold prices gave up earlier gains and ended lower for the day. Gold prices earlier hit an intra day high but then fell as traders speculated about rate cut outlook from Fed tomorrow. Gold also fell on speculation mining operations will resume in South Africa. South Africa produces 10% of the world's gold. Silver prices gained 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 fell $2 (0.2%) to close at $925.1 an ounce on the New York Mercantile Exchange. Earlier in the day, it hit an intraday price of $933.3 an ounce. Last week, gold prices gained 3.3%. This year, prices have gained 10.5% till date.
Comex Silver futures for March delivery rose 5 cents (0.3%) to $16.8 an ounce. Silver has gained 12.8% in 2008. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years.
The Federal Open Market Committee policy-setting meeting started today and most traders expect Federal Reserve to announce another interest-rate cut tomorrow to avoid the US economy from plunging into recession.
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.
Gold witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
In the currency markets today, the dollar was mixed. The dollar index, which tracks the performance of the greenback against six other major currencies, was at 75.612, compared with 75.590.
In the energy market today, crude oil rose a fourth day on speculation the U.S. Federal Reserve will reduce interest rates. Crude oil for March delivery rose 65 cents ( 0.7%) to settle at $91.64 a barrel.
Last week, Federal Reserve slashed its benchmark interest rate 0.75% to 3.5% after global equity markets tumbled on concern the slumping U.S. economy will drag down the growth rates of other nations. Federal Reserve's decision came as a surprise to everyone but Fed took the same as stocks markets worldwide, had been plunging on fear that US economy would be hitting a recession soon.
Gold had climbed 31% in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. The Fed reduced federal funds rate three times in FY 2007.
At the MCX, gold prices for February delivery closed lower by Rs 27 (0.23%) at Rs 11,701 per 10 grams. Prices rose to a high of Rs 11,800 per 10 grams and fell to a low of Rs 11,651 per 10 grams during the day's trading.
At the MCX, silver prices for March delivery closed Rs 26 (0.12%) higher at Rs 21,599/Kg. Prices opened at Rs 21,400/kg and rose to a high of Rs 21,599/Kg during the day's trading.
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