Bullions hit fresh three-year lows

Bullion metal prices ended substantially lower once again on Thursday, 27 June 2013 at Comex. Gold and silver prices plummeted and hit another fresh nearly three-year low. The steep price decline coincided with reported remarks from Atlanta Federal Reserve President Dennis Lockhart.

Gold for August delivery ended lower by $18.2 (1.5%) at $1,211.6 an ounce on the Comex division of the New York Mercantile Exchange on Thursday.

July silver ended lower by $0.06 (0.3%) at $18.53 an ounce on Thursday.

Several factors are working against the precious metals markets and the raw commodity sector, in general. A strong batch of U.S. economic data earlier during the week further bolstered notions the Fed will begin to wean the U.S. economy from its easy-money policies, which for several years have been a bullish underlying factor for the raw commodity sector, including the precious metals. Last week's hawkish Federal Reserve FOMC meeting is still reverberating in the market place.

On Thursday, Lockart said in a speech that the Fed will eventually reduce its balance sheet (meaning wind down its quantitative easing and monthly bond buying). He also said there are no inflationary problems on the horizon. However, he also said nothing has changed lately in the Fed's overall monetary policy. He added that it's likely the Fed will start looking at raising interest rates sometime in 2015.

Goldman Sachs cut its outlook on gold prices by more than 9% to $1,300 an ounce for the end of this year, and by more than 17% to $1,050 an ounce for the end of 2014. Later in the day, HSBC followed suit, trimming its estimates for average gold prices through 2015. HSBC lowered its average 2013 price by about 9% to $1,396 an ounce, while setting the 2014 price at $1,435 an ounce, and the 2015 price at $1,395 an ounce.

UBS cut its outlook on silver prices earlier during the week. The bank slashed its one-month silver forecast 32.7% to $17.50 a troy ounce and cut its three-month silver forecast 26.8% to $20.50 an ounce.

The U.S. dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by 0.1% on Thursday.

Among latest economic data expected at Wall Street, personal income report pointed to an increase of 0.5% in May. The consensus expected personal income to rise 0.2%. Meanwhile, personal spending increased 0.3% in May and nearly reversed the entire 0.3% decline that occurred in April. The consensus expected spending levels to increase 0.4%. In addition, the core PCE price index increased 0.1% in May. That was up from no growth in April and exactly what the consensus expected.

The initial claims level fell from an upwardly revised 355,000 (from 354,000) for the week ending June 15 to 346,000 for the week ending June 22. The consensus expected the initial claims level to fall to 345,000. Over the past several weeks, the initial claims level has followed a soft saw tooth path with the four-week moving average remaining nearly flat the entire time. The claims data suggest that labor market conditions have not materially changed during this time.

At the MCX, gold prices for August delivery closed lower by Rs 761 (2.9%) at Rs 25,375 per ten grams. Prices rose to a high of Rs 26,279 per 10 grams and fell to a low of Rs 25,265 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed lower by Rs 765 (1.9%) at Rs 39,120/Kg. Prices opened at Rs 39,912/kg and fell to a low of Rs 38,966/Kg during the day's trading.

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