Gold & Silver Surge to New Highs

@FT By Neil Dennis

Gold hit a record high, while silver surged more than 5 per cent to within a whisker of its all-time peak, as the dollar continued its decline and inflation concerns drove haven flows.

Driven also by government debt concerns, gold rose 1 per cent to $1,518.20 a troy ounce, the seventh-consecutive trading session in which it has hit a record high. Silver surged 5.5 per cent to $49.17 an ounce, having hit a 30-year high of $49.80, within sight of the landmark $50 level.

The market considers that $50 an ounce marks a record nominal high for silver, although veteran traders say that in the chaotic trading of January 18, 1980, when the Hunt brothers’ cornering of the market came to a head, some small amounts of the metal changed hands in the physical market at even higher prices. The large precious metals banks, which have been meeting daily to set prices for silver since 1897, on that day recorded a “fixing” – or daily benchmark price – of $49.45.

While demand has been strong for both metals, silver’s rally has substantially outpaced that of gold – up 60 per cent so far this year, compared with a 7 per cent gain for bullion.

“Although demand for silver is certainly increasing from this quarter we do not believe it explains the entire rally in silver prices,” said James Steel, precious metals analyst at HSBC Securities.

Silver is used in the manufacture of solar panels, demand for which has increased in the face of rising energy prices.

But there has also been some trading floor chatter, none of it substantiated or commented on officially, that the market is being squeezed – either by a billionaire investor or a central bank.

Gold’s rise, however, remained a result of risk hedging against the threats of inflation and government debt concerns.

“The gold rally is being sustained by a weak dollar, concern about government debt levels across member states of the Organisation for Economic Co-operation and Development, and rising inflation associated with high commodity prices, notably oil and agricultural products,” said Mr Steel.

On Monday, the dollar remained near its three-year low against a basket of currencies.