September 23, 2010

Silver on its highest level as Gold continues climb

Silver advanced to a 30-month high as the dollar slumped on prospects for a further easing of monetary policy by the U.S. central bank to safeguard the economic recovery. Gold traded near a record.

Spot silver gained as much as 0.3 percent to $21.2225 an ounce, the highest level since March 2008, before trading at $21.1512 at 12:15 p.m. in Singapore. Gold was little changed at $1,292.55 an ounce, after reaching a record $1,296.30 yesterday.

“With the prospect of quantitative easing coming on board, money is flowing into riskier assets, such as commodities,” said Justin Smirk, chief economist at St. George Bank Ltd. in Sydney. Silver may climb to the highest price since 1980, said Smirk, referring to an increase to more than $21.355 an ounce.

The Federal Reserve this week indicated it’s prepared to pump more money into the U.S. economy, helping to weaken the dollar and driving precious metals higher. The Dollar Index, a six-currency gauge of the dollar’s value, touched the lowest level yesterday since March 17.

Silver has beaten gold in the past month, gaining about 18 percent compared with the yellow metal’s 5.4 percent climb, on investor demand for a cheaper haven. An ounce of gold bought as little as 60.88 ounces of silver today, the smallest amount since January.

‘Increased Demand’

“Silver is rising alongside gold: that said, gold does look expensive compared to silver,” said Geoff Clear, head of Asia commodities at Australia & New Zealand Banking Group Ltd. “Weakness in the U.S. economy and now talk of quantitative easing has increased demand.”

Silver traded at more than $49 an ounce in 1980, according to current data. Commerzbank AG forecast in June that the metal, dubbed as “gold’s little brother,” may surge to as much as $23 next year on increased investment and industrial demand.

Silver doubles as a store of value for investors concerned that the recovery may falter, hurting currencies, and as a raw material for industry. Holdings in the iShares Silver Trust, the biggest exchange-traded fund backed by silver, rose yesterday to 9,509.55 metric tons, the highest level since reaching a record 9,514.35 tons in December.

“Silver does face a dilemma if the outlook for the economy is poor” because of its industrial applications, which include batteries, said Clear. “There are still people out there who buy silver to keep as an investment, and as long as gold continues to rally, silver will find that support.”

The dollar traded little changed today against the six- currency basket before a report that may show existing U.S. home sales were near the lowest in 10 years, backing the case for the Federal Reserve to keep borrowing costs low.

The Fed has kept the benchmark interest rate at zero to 0.25 percent and purchased mortgage-backed securities and Treasuries to bolster the world’s biggest economy.

The Bangko Sentral Ng Pilipinas (BSP) will continue to monitor the economic outlook and is “prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.

Meanwhile, the Philippine Stock Exchange already broke its previous high after reaching more than 4000 points. A sign that the country has been recovering from the Global Economic crisis and is heading toward a more stable territory.

Among other precious metals, platinum for immediate delivery gained as much as 0.4 percent to $1,640.38 an ounce, the highest price since May 19, before trading at $1,636.75. Palladium dropped 0.3 percent to $544.85 an ounce.

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