Reuters Market News
NY silver leaps to 15-month high, gold stretches rally
NEW YORK, May 21 (Reuters) - COMEX silver sped to its loftiest price in 15 months Tuesday, clearing the previous high for the year, as money managers diverted some of their buying enthusiasm from overbought gold.
"I think people woke up to the fact that silver hadn't moved in recent weeks and it's just catching up," said Ian MacDonald, head of bullion dealing at Commerzbank.
Silver mimicked a surge in gold, which broke sharply higher as the dollar fell Monday, then stalled on Tuesday after extending the 2002 rally to a fresh high.
Shortly after the COMEX opened, July silver (0#SI:) rallied quickly to $4.865 an ounce, its highest since Feb 7, 2001. The contract ended up 6.5 cents, or 1.36 percent, at $4.845 an ounce, off a low of $4.755.
It gathered momentum after breaking above the April 2 high at $4.77 overnight and then the $4.80 psychological level, where commodity funds had stacked buy orders expecting silver to accelerate higher once the chart point was exceeded.
"People are concerned about stuff. People are looking for alternative investments," said a desk broker. "Dollar weakness probably prompted by those things -- increasing debt, a poor balance of trade, the Middle East problems, global problems, stock market problems. There's a whole litany of things."
Spot silver (XAG=) was at $4.82/84, up from Monday's close at $4.77/79, and fixed in London at $4.785.
Estimated volume was a brisk 20,000 lots. Dealers said at least one large fund looked like it bought at the top and is thus at risk to any pullback.
"There seemed to be some new fund interest above $4.80," said a floor broker. "Anything above $4.80 has been taken out."
June gold (0#GC:) ended up 10 cents at $316.10 an ounce, trading from $314 up to a midday high at $317.30, its priciest since June 2000, when the contract was thinly traded toward the back of the board. Volume was 70,000, including switches.
Spot gold (XAU=) closed $315.80/6.30, just up from $315.65/6.15 late Monday. It topped at $317 on Tuesday, its highest since February 2000 when it traded $319.
The rally cooled as the dollar steadied against the euro, while continuing its slide to a new five-month low against the yen. The weak greenback makes dollar-priced precious metals more affordable to foreign investors in home-currency terms.
Wall Street stock prices fell for the second straight session on profit concerns, the slack economy and uncertainty about geopolitical stability.
Investors continued to diversify into gold as a form of portfolio insurance against Middle East violence, and more ominous talk of war between nuclear powers India and Pakistan over the disputed Indian state of Jammu and Kashmir.
The neighbors have amassed more than a million troops along the border since India blamed a deadly December attack on its parliament on Pakistan-backed Islamic militants.
The armies have exchanged heavy fire for five days running after the most recent murderous assault on an Indian army camp by suspected Pakistan-based Kashmiri separatists.
To top it off, the White House this week has been talking up the likelihood of another terror attack on America.
"It all helps the gold market and of course the funds are in there jumping in on the trend," MacDonald said.
NYMEX July platinum (0#PL:) lost $6.20 to $538 an ounce. Spot platinum (XPT=) was quoted at $540/547.
Illiquid June palladium (0#PA:) fell $12.65 to $370.15 an ounce, reversing an $8.30 gain on Monday. Spot palladium (XPD=) fetched $364.50/379.50.
"From what we were hearing it was just speculative interest trying to churn it up," said a refinery dealer. "At some point it had to give, the fundamentals weren't there for it."
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