Silver poised for biggest monthly gain in 22 years; gold rises
May 29, 2009, 11:18 a.m. EST
Silver poised for biggest monthly gain in 22 years; gold rises
By Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -- Silver futures gained more than 2% Friday, heading for 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 33 cents, or 2.2%, to $15.49 an ounce on the Comex division of the New York Mercantile Exchange. The front-month June contract stood at $15.42 an ounce.
Meanwhile, gold for June delivery rose $13.40, or 1.4%, to $974.90 an ounce.
Silver gained 25% 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 less than 10% in the month.
"What you may now 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. See Economic Report.
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 comparing with 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 fund, iShares Silver Trust ETF has gained 33% this year, following their 40% decline in the second half of last year.
SPDR Gold Trust , meanwhile, has risen 9% this year. It fell 6% in the second half of last year.
In other metals Friday, July copper gained 4.55 cents, or 2.1%, to $2.1825 a pound. The June palladium contract rose $2.20, or 1%, to $234.20 an ounce, while July platinum rose $30.10, or 2.6%, to $1,180 an ounce.
Among metals-sector equities, shares of Barrick Gold Corp. rose 1.2% to $38.51 and South Africa's Gold Fields Ltd. was up 3.1% at $13.49, while Newmont Mining Corp. gained 2.9% to $48.68.
The Amex Gold Bugs Index , which tracks the share prices of major gold companies, rallied 3.6% to 399.57.
