Silver Advances to Costliest Versus Gold in 11 Months on Investor Demand

Silver climbed to the most expensive relative to gold in 11 months as investors sought to protect their wealth on speculation governments may add to monetary easing to help the recovery, weakening currencies.

The ratio of gold to silver dropped below 60 for the first time since October, falling as low as 59.8955. Silver has outperformed the yellow metal since June 30, advancing 17 percent against gold’s 5.5 percent increase, as investors bought the commodity because of its comparative cheapness.

“Silver is trying to catch up with gold,” said Ellison Chu, precious metals manager at Standard Bank Asia Ltd. “Gold is already at a record but silver is quite far from it.”

The Federal Reserve said Sept. 21 it was willing to ease monetary policy further to spur growth and “return inflation, over time, to levels consistent with its mandate.” The Bank of Japan will discuss taking additional easing steps at its two-day policy meeting starting Oct. 4, Kyodo News reported, citing unidentified sources close to the matter.

Silver for immediate delivery gained as much as 0.8 percent to $21.90 an ounce, the highest price since September 1980, and last traded at $21.8340 at 2:04 p.m. in Singapore. The metal reached an all-time high of $49.45 in January 1980, according to Bloomberg data. Gold jumped to a record $1,312.25 an ounce today.

Dollar Weakness

Holdings in the iShares Silver Trust, the biggest exchange traded fund backed by the metal, climbed 143 metric tons to a record 9,756.04 tons as of yesterday, according to the company’s website. The metal doubles as a store of value for investors concerned about an economic slowdown and as a raw material. Industrial applications for silver, including electrical conductors and batteries, represent about half global demand.

Investors have been putting money into precious metals as other tools like the dollar are “not so reliable,” said Standard Bank’s Chu. The Dollar Index, a six-currency measure of the greenback’s value, is headed for its worst quarterly performance since the period ending June 2002.

“People are expecting the U.S. dollar to remain weak and putting money into commodities is a good alternative,” Chu said from Hong Kong. The Dollar Index tumbled to 78.828 today, the lowest level since February.

China Exports

Falling exports from China contributed to silver’s recent rally, according to Heraeus Ltd. China exported 64 percent less of the precious metal in the first eight months of this year compared to the same period last year, according to customs data.

“Fabrication demand from jewelers and industrial demand from solar panel makers has been very good this year in China,” Heraeus’ precious metals trading manager Dick Poon said. China is the world’s third-largest consumer and producer of silver, according to The Silver Institute.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net

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