Silver Futures Jump to 30-Year High: Gold Is Steady After Topping $1,300

Silver climbed to the highest price since 1980 as the dollar’s slump boosted demand for precious metals as alternative assets. Gold climbed to a record, topping $1,300 an ounce.

Silver has jumped 27 percent this year, and gold has gained 18 percent, outperforming global equities, Treasuries and most industrial metals. Today, the dollar fell to the lowest level since February against a basket of six major currencies as the Federal Reserve keeps borrowing costs low and moves closer to easing monetary policy to bolster the U.S. economy.

“You’ve got a lot of open sky for gold,” said Michael Guido, the director of hedge-fund sales at Macquarie Bank in New York. “There’s no fear of higher rates to come, and the dollar is back to playing defense. Silver hasn’t broken any records, so there’s going to be more acceleration in the price.”

Silver futures for December delivery rose 18.6 cents, or 0.9 percent, to settle at $21.399 an ounce at 1:38 p.m. on the Comex in New York. Earlier, the price reached $21.48, the highest level for a most-active contract since October 1980.

Gold futures for December delivery rose $1.80, or 0.1 percent, to $1,298.10. Earlier, the metal climbed to a record $1,301.60.

This week, silver gained 2.8 percent. In the third quarter, the price has climbed 14 percent, heading for the seventh straight gain.

Gold advanced 1.6 percent this week. In the third quarter, the price has gained 4.2 percent, heading for the eighth straight gain.

Dollar to ‘Suffer’

“Gold hit the psychologically important $1,300, so you’re seeing some profit-taking after hitting that number,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “Expect gold to work its way higher. There’s nobody in the dollar-bull camp. The Fed is cranking up the printing press again, and the dollar is going to suffer for it.”

The Fed has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 and purchased mortgage-backed securities and Treasuries to help lift the economy. This week, Fed policy makers signaled that the central bank may buy more securities and that inflation levels were low, an indication that low borrowing costs will last for an extended period.

“With the Federal Reserve saying that they want inflation, that’s given people the motivation to buy gold,” said Barry James, who manages $2 billion as chief executive officer at James Investment Research Inc. in Xenia, Ohio.

Gold reached a record for the sixth time in seven sessions, and investors are looking for a cheaper alternative in silver, analysts said.

‘Capture a Bid’

“When gold gets to these levels, you’re going to see substitution,” Guido of Macquarie said. “Silver will also capture a bid off the industrial base.”

Batteries and other industrial uses account for about half of silver demand, according to GFMS Ltd., a research company. Silver futures reached an all-time high of $50.35 in 1980, a year after the Hunt brothers tried to corner the market.

Using a ratio that measures how many ounces of silver would be needed to buy an ounce of gold, “a case can be made that investors are becoming hip to silver’s allure,” said John Licata, the chief commodity strategist at Blue Phoenix in New York.

The ratio was above 72 in 2009 and is now below 61, an indication that silver prices have further to rally, he said.

‘Hot Money’

“Silver is really about hot money,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London. “It may have several more dollars to go.”

Assets in the iShares Silver Trust, the biggest exchange- traded product backed by the metal, jumped 73.04 metric tons to a record 9,582.59 tons yesterday.

Gold assets in exchange-traded products fell 1.41 tons to 2,088.3 tons yesterday after reaching a record 2,089.7 tons on Sept. 22, according to Bloomberg data from 10 providers.

Gold for immediate delivery rose to a record $1,300.07 today. The price headed for the 10th straight annual gain, the longest rally since at least 1920.

Platinum futures for January delivery fell $4.80, or 0.3 percent, to $1,645.40 an ounce on the New York Mercantile Exchange. The metal gained 1.4 percent this week and is up 12 percent this year.

Palladium futures for December delivery rose $3.65, or 0.7 percent, to $560.50 an ounce. The price climbed 2.7 this week and is up 37 percent this year.

To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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