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Gold and silver: through the roof

April 25, 2011

ft.com

All that glitters is gold, and silver… at least that’s what the market thinks. The price of spot silver jumped 5 per cent to hit $49 a troy ounce, and gold hit a record high for the seventh consecutive session, at $1,517.71 a troy ounce in early trading on Monday. Meanwhile, the US dollar fell to a three-year low.

According to reports from Reuters, much of the interest looks to be coming from India and China.

“Everyone is buying… there is stop-loss buying, as well as a good buying interest from China,” Reuters reported, citing a trader in Hong Kong.

Gold has been at all time highs since the start of the year when oil prices jumped and geo-political concerns in the Middle East began to shake confidence in a global economic recovery. According to the FT’s Jack Farchy, investor holdings in gold through exchange traded funds have risen 1.38 per cent in April this year – the strongest monthly gain since August 2010.

But it’s not just gold that has generated interest in recent months. Holdings in iShares Silver trust, the world’s largest silver-backed exchange traded fund, has increased by 2.4 per cent so far this year. To put the inexorable rise of silver in perspective, it has gained 17 per cent since the start of this year, and 130 per cent since it surpassed the psychologically important $20 barrier seven months ago.

Concerns over the US economy and the subsequent weakness of the greenback could further accelerate the trend for investors to seek refuge in precious metals.

The US dollar was at a three-year low on Monday, at $1.46 against the euro. Brent crude was up $0.36 at $124.35 a barrel. China’s main stock index, the Shanghai Composite, closed down 1.5 per cent on concern over more policy tightening, as well as tigher liquidity conditions.

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