Precious metals shed glaze after ECM president also disappoints

Mario Draghi refrains from announcing a fresh monetary stimulus plan for the European Union

Precious metal prices ended substantially lower on Thursday, 02 August 2012. Prices fell after The European Central Bank did not lower its key interest rates at its meeting Thursday, nor did it announce any specific plans to initiate a fresh round of quantitative easing of monetary policy.

Gold for August delivery fell $16.6, or 1.1%, to end at $1,590.7 an ounce on the Comex division of the New York Mercantile Exchange on Thursday.

On Thursday, silver prices for September delivery fell 54 cents (2%) to end at $27.

ECB President Mario Draghi at his ECB press conference following Thursday's meeting refrained from announcing a fresh monetary stimulus plan for the European Union. However, Draghi did hint that such a plan is coming down the pike. Most commodity market bulls, including the precious metals bulls, were disappointed that no specific plans were announced by the ECB, or by the U.S. Federal Reserve after its FOMC meeting Wednesday.

The Bank of England also met to discuss its monetary policy. Thursday morning's BOE announcement showed no change in interest rates or monetary policy, which is what the market place expected.

In the currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by 0.25%.

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.

Among economic data expected for the day at Wall Street, the latest weekly initial jobless claims count totaled 365,000, which is in-line with the 365,000 that had been expected. The tally is also up from the upwardly revised prior week count of 357,000. As for continuing claims, they fell to about 3.272 million from 3.291 million.

June Factory Orders came in at a 0.5% decrease, which was worse than the 0.6% expected increase.

However, from the ECB and Fed meetings this week, it appears quantitative easing measures by the U.S. and EU are coming soon. Such would be at least initially bullish for the precious metals. Any fresh influx of money pumped into the major world economies would work to stimulate consumer demand, and it would also raise the specter of price inflation.

At the MCX, gold prices for October delivery closed unchanged at Rs 30,014 per ten grams. Prices rose to a high of Rs 30,139 per 10 grams and fell to a low of Rs 29,955 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed lower by Rs 267 (0.5%) at Rs 52,905/Kg. Prices opened at Rs 53,157/kg and fell to a low of Rs 52,818/Kg during the day's trading.

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