Silver held near its highest level in more than 22 years on Monday buoyed by expectations of more demand and hopes of an exchange traded fund being approved.
Gold, which failed to capitalise on silver’s gains last week, rebounded as the US dollar fell against the euro, making dollar-priced bullion cheaper to buy for holders of other currencies.
But the physical market lacked activity, with dealers struggling to attract buyers even though gold has dropped more than 3 percent in value since spiking to a 25-year high above $574 an ounce in early February.
“My customers are sidelined. They only buy gold when they need it. There’s no festive season or anything,” said Beh Hsia Wah, a dealer at United Overseas Bank in Singapore.
“We see more scrap gold. Some might be coming from Indonesia and some from other countries,” he said.
Singapore dealers put the gold/silver ratio at 53.5:1, versus 58:1 at the end of February and 60:1 in late 2005. The ratios indicate the number of ounces of silver needed to buy one of gold, and falling ratios are normally seen as a bullish signal.
Spot silver rose to $10.37/10.40 an ounce from $10.34/10.37 late in New York on Friday, when it hit a high of $10,43 on hopes the US Securities and Exchange Commission might soon approve a silver exchange traded fund (ETF) proposed last year by Barclays Global Investors.
ETFs are designed to closely reflect the price of an underlying market or commodity, such as a stock index or gold, and they trade like listed stocks on any exchange.
Silver, a precious metal used in jewellery, photography and electronics, has risen as much as 18 % since the start of this year, mainly due to talk about an ETF.
Dealers pegged the upside target at $10,50 but unlike gold, liquidity is low in the silver market. That means the price could easily move in either direction, they said.
“I just think silver is getting a little more speculation than it normally would,” said Darren Heathcote, head of trading at NM Rothschild in Sydney.
Spot gold rose to $555,20/556,10 an ounce from $554,10/555,00 late in New York. The metal had fallen more than $1 an ounce last week.
Benchmark gold futures on the Tokyo Commodity Exchange, currently February 2007, fell 1 yen per gram to 2,102 yen, tracking declines in New York.
“The picture is very much unchanged from end of last week. I think it still looks reasonable rangebound at the moment. Probably, it may struggle to break through the $560 barrier today,” said Heathcote.
Gold could move in a range of $552 to $558 an ounce for the time being but a further drop in the dollar may give the metal an impetus to breach $560,” he said.
“I guess, also, we might see a contagion effect on the back of what’s happening in silver.”
Gold rose to its highest level in 25 years at $574,60 February 2 as investors diversified into the precious metal on worries about rising energy costs, tension in the Middle East and uncertainty over the dollar’s outlook.
The dollar traded near a two-month low against the euro as traders scaled back their expectations about how much higher US interest rates will climb.
The euro was at $1 2172 – within sight of $1 2208 hit on electronic trading platform EBS on Friday. It was its highest point since January 27.
In other precious metals, platinum rose to $1 035/1 040 an ounce from $1,032/1,036 in New York. Palladium eased to $314/319 an ounce from $315/320. quoted prices.