30 May 2009

Silver Rockets to a Record Gain

There were delivery strains at the Comex this month.

A few more months like this and they will be taking the metal bears out of the pits on stretchers.

Remember, nothing ever goes straight up.

Silver posts biggest monthly gain in 22 years; gold rallies
By Moming Zhou, MarketWatch
May 29, 2009, 2:29 p.m. EST

NEW YORK (MarketWatch) -- Silver futures gained 3% Friday, ending May with their biggest monthly gain in 22 years as inflation worries and hopes for an economic recovery boosted the metal. Gold rose to three-month highs as the dollar slipped.

Silver for July delivery, the most active contract, gained 45 cents to end at $15.61 an ounce on the Comex division of the New York Mercantile Exchange. The front-month June contract closed at $15.60 an ounce.

Meanwhile, gold for June delivery rose $17.30, or 1.8%, to close at $978.80 an ounce, the highest settlement since Feb. 23.

Silver has gained 26.6% this month, the biggest since April 1987. The metal has many industrial uses but is also seen as a hedge against a weaker dollar and inflation. In contrast, gold, which has limited industrial uses, has gained 9.8% in the month, the biggest monthly gain since November.

"What you may now be seeing is people think we are moving toward a recovery, and maybe we should be less pessimistic about the future of the metal, that may be factoring in the prices," said Jeffery Christian, managing director of New York-based precious metals consultancy CPM Group.

Silver, whose biggest single industrial use is in photography, is also used in medical applications and solar-energy devices.

Friday's economic news reinforced economic recovery hopes. The U.S. economy contracted at a revised 5.7% annual rate in the first quarter, a decline that's smaller than the 6.3% drop in the fourth quarter, the Commerce Department reported Friday.

More volatile

CPM's Christian also pointed out that silver had declined sharply in the second half of last year, when the global economy was entering into a sharp downturn. Its prices had fallen more than the price of gold.

"Silver is playing catch-up to some extent," said Christian.

The silver investment market is traditionally more volatile than gold, because the market is smaller than the gold market.

"The gold market is more participated, involved more money, and more liquid, and it tends to see lower volatility," said Christian. "In silver, you have few people with less money. It's a much more illiquid market and prices are always more volatile than gold."

In exchange-traded funds, iShares Silver Trust ETF has gained 38% this year, following its 40% decline in the second half of last year.

SPDR Gold Trust , meanwhile, has risen 11% this year. It fell 6% in the second half of last year.

In other metals Friday, July copper gained 6.05 cents, or 2.8%, to $2.1975 a pound. Copper rose 7% in May.

The June palladium contract rose $4.05, or 1.7%, to $236.05 an ounce, while July platinum rose $46.20, or 4%, to $1,196 an ounce.

Among metals-sector equities, shares of Barrick Gold Corp. rose 2.2% to $37.98 and South Africa's Gold Fields Ltd. was up 2% at $13.34, while Newmont Mining Corp. gained 2.1% to $48.35.

The Amex Gold Bugs Index , which tracks the share prices of major gold companies, rose 2.6% to 395.52.