Silver Heads for Best Month Since '87
Source: Bloomberg, Nicholas Larkin and Glenys Sim (5/29/09)
"The 'green shoots' story is more positive for silver."
The U.S. Dollar Index, heading for its biggest monthly drop this year, fell today on speculation gains in equities spurred demand for higher-yielding assets. Precious metals typically move inversely to the U.S. currency. Gold is set for its best month since November.
"Extreme dollar weakness is adding to the momentum," Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said today in a note. "Ascending oil prices, concerns of inflation and fears of massive U.S. debt have certainly been supporting" both metals, he said.
Silver futures for July delivery climbed 2% to $15.46 an ounce on the New York Mercantile Exchange's Comex division as of 8:32 a.m. in New York. The contract has rallied 25% this month. Silver for immediate delivery climbed 2% to $15.445 an ounce in London.
Gold futures for August delivery advanced as much as $15.30, or 1.6%, to $978.50 in New York, the highest since Feb. 25, and are up 9% this month. Gold for immediate delivery rose $13.45, or 1.4%, to $972.90 in London.
Silver "is very correlated to gold, but silver does have industrial application that gold doesn't," Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, said today by phone. "The 'green shoots' story is more positive for silver. It's a very small market compared to gold. Even small amounts of money coming in can move up the price a lot."
"This trend is likely to persist as we head into the summer months and more 'green shoots' offer additional support to silver's appeal as an industrial metal as well," Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a note.
Industrial demand is rising for silver, used in equipment from solar cells to mobile phone covers, according to the U.S. Geological Survey. The metal, whose biggest single end use is in photography, also acts as a chemical catalyst to make products such as formaldehyde.