Silver rose to its highest level in more than three months on Monday as speculative buying spilled into Asia, while gold firmed on the back of a weaker dollar. Silver has rebounded more than 30 percent since falling to a four-month low of $9.38 an ounce in mid-June, and dealers said good demand for a silver exchange-traded fund launched on the American Stock Exchange in late April spurred more buying.
Silver hit a high of $12.96 an ounce; it's highest since May 31, when it rose as high as $13.10 an ounce. The metal was quoted at $12.90/12.95 an ounce, slightly higher than $12.89/12.96 late in New York on Friday.
The US market will remain shut on Monday for the Labour Day holiday. "We are getting closer to $13 but today is a holiday in the US, so I don't think anything will happen.
We have to see whether the Europeans want to do something or not," said a dealer in Singapore. "But eventually, we will breach $13. People can see the market doesn't want to come down. The euro is quite firm, so I think there's quite a good tone," he said.
Dealers said a falling gold/silver ratio was supportive for the metal, used in jewellery, photography and electronics. The ratio has fluctuated since the April launch of Barclays Global Investors' iShares Silver Trust. The ratio slipped below 50 in early April and hit a low of 43.70 in the middle of that month before climbing to 52 a few days later.
It fell below 50 in May, and briefly headed above 60 in the middle of July, said some Singapore dealers. "It looks like the ratio is 48.4 to 1 today," said a dealer. The ratio indicates the number of ounces of silver needed to buy one ounce of gold. Declining ratios are normally seen as a bullish signal.
Investors may think that silver was much cheaper than gold, but the physical market saw limited purchases from jewellery makers, said Ronald Lunge, director of Lee Cheong Gold Dealers in Hong Kong.
"I think you will start to see some buying interest around $12," he said. Spot gold rose to $625.40/626.40 an ounce from $624.85/625.85 late in New York. Precious metals were expected to watch currencies for direction, and some dealers expected demand for gold from jewellers to pick up soon ahead of the holiday season later this year.
"The physical market is a bit quiet but we saw some demand around $620," said Lunge, adding that jewellers would be building up inventories for sales during Christmas.
Benchmark gold futures on the Tokyo Commodity Exchange, currently August 2007, fell 10 yen per gram to 2,377 yen ($20.31), reflecting losses in New York. The euro was firmer against the dollar at $1.2859.
Dealers said the dollar was vulnerable against the euro after on Friday's US jobs report failed to bolster expectations for a Federal Reserve rate rise at its policy meeting this month. Data released on Friday showed the US economy generated 128,000 jobs in August, barely above median expectations of 120,000.
Platinum rose to $1,246/1,251 an ounce from $1,242/1,247. Palladium also rose to $343/348 an ounce from $342/347.