Silver hits 31-year high; gold gains

SINGAPORE - Silver jumped to its highest since early 1980 on Tuesday on inflation concerns, a rise in ETF holdings to another record and growing industrial demand, helping gold defy pressure from a firming US dollar against the euro.

In addition to rising investment demand for silver as a cheaper alternative to gold, an expected increase in physical buying from China was likely to support the metal, which gained 22 per cent in the first quarter – its ninth consecutive quarterly increase.

Silver, widely used in electronics manufacturing, rose as high as $US38.77 an ounce and was quoted at $US38.68 an ounce by 1624 AEDT , up 26 cents.

"We do see a lot of demand for silver from China, so we think silver used in solar panels have increased. We think China will have a lot of demand for silver in the medium to long term," commodities strategist at ANZ in Melbourne Natalie Robertson said.

"With China focusing more on renewable energy, especially after the nuclear crisis in Japan, they will probably be developing a lot more solar panels. Fundamentally, the silver picture looks very strong as well."

IShares Silver Trust said its holdings rose to a record at 11,162.45 tonnes by April 4 from 11,139.52 tonnes on March 24.

But some analysts remain wary of silver's extreme volatility, which has led to some heart-stopping reversals in recent years.

When commodities sold off heavily in mid-March, silver dropped nearly five per cent in a single day, versus gold's two per cent fall.

Gold added $US1.20 to $US1,437.75 an ounce – still below a lifetime high around $US1,447 an ounce struck last in March. Trading was slow, with financial markets closed in Hong Kong and mainland China.

"I think China has turned to silver jewellery since last year because it's cheaper. I do see demand for silver from China for jewellery and I also heard China is buying silver for hedging purposes," a physical dealer in Singapore said.

"Gold is very quiet, although I do see light physical buying from Thailand."

The physical gold market also saw some selling from Indonesia, which was offset by purchases from jewellers in top consumer India.

The high-demand wedding season is underway in India, where jewellery is the most common gift during religious events and weddings.

US gold futures for June rose $US5.7 an ounce to $US1,438.7 an ounce.

The euro hovered below a five-month high against the dollar as investors assessed whether it can make fresh gains given that market players have already positioned themselves for a series of interest rate hikes in the euro zone during 2011.

The Nikkei slipped more than one per cent with the mood soured by Tokyo Electric Power's fall to an all-time low while the market's post-quake rebound looks to have run its course.

Oil prices hovered near their highest levels since 2008 on Tuesday, with Brent near $US121 a barrel, as unrest in the Middle East and North Africa supported prices and on delays to elections in Nigeria.

(Source: http://www.businessspectator.com.au/bs.nsf/Article/PRECIOUS-Silver-hits-31-year-top-iShares-Silver-at-FM9UX?opendocument&src=rss)