Precious metals close at their historic highs on Libya unrest

Gold and silver prices in Mumbai spot markets on Monday closed at historic highs with gold closing above Rs 21,000 for the first time in Mumbai.

Silver closed at a new high of Rs 54,970 a kilogram, Rs 1,370 higher compared with Saturday’s close. On International markets, silver also touched a new high of $36.71 an ounce.

Gold also made a new high of Rs 21,125 per 10 grams on Mumbai spot markets and $1443.53 an ounce in London market.

“With the exception of palladium, prices rose across the complex as the unrest in Libya intensified, oil prices rallied, the US non-farm payrolls were in line with expectations, but dollar continued to weaken against the euro to levels not seen in four months,” said an analyst with Barclays commodities.

Traders in Mumbai attributed the rise in silver prices to short covering by some trapped hedge funds who had sold silver at $28-29 per ounce but prices have started rising since then. Later, the stop-loss kept at various levels of $33 and $35 was also surpassed resulting in short-covering.

The open interest has been falling in silver and latest data shows that positions till March 1 suggests a fall in open interest of silver.

“March revealed tactical investors increased their exposure to gold, but reduced positions across the rest of the complex,” said an analyst at Barclays .

CFTC (US commodities futures regulator) data also shows the positive momentum in gold has come from speculative interest with Comex gold net fund length up 16.8k lots, the largest weekly increase since August last year. Non-commercial positions rose to their highest-level since the start of the year on the back of the establishment of fresh longs but also because of the short covering activity.