Big drop for bullions

Gold for February delivery ended lower by $76.2 or 4.6%, to end at $1,586.9 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday. Prices fell to a low of $1,565.7 during intra day trading.

On Wednesday, silver prices for March delivery fell $2.33 or 7.4% to end at $28.94. Last week, silver lost 1.3%. For the month of November, silver lost 4.7%.

In the currency market on Wednesday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies fell by about 0.3%. The dollar rose to 11 month high mainly against the euro.

Fresh developments on the European Union debt crisis scene included higher Italian bond yields Wednesday and some fresh, weak economic data coming from the EU. That pushed the Euro currency to a fresh 11-month low Wednesday, which in turn boosted the U.S. dollar index.

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.

Economic data in US today that reflecting a large jump in imported oil, import prices increased 0.7% in November and 9.9% on a year-over-year basis. Export price inflation remained little changed on the month.

At the MCX, gold prices for February delivery closed lower by Rs 688 (2.4%) at Rs 28,183 per ten grams. Prices rose to a high of Rs 28,810 per 10 grams and fell to a low of Rs 27,858 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed lower by Rs 2,246 (4%) at Rs 54,332/Kg. Prices opened at Rs 56,400/kg and fell to a low of Rs 53,455/Kg during the day's trading.

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