Silver Heads for Best Month Since ‘87; Gold at Three-Month High

May 29 (Bloomberg) -- Silver headed for its biggest monthly gain in 22 years and gold rose to a three-month high in New York and London as a weaker dollar increased demand for precious metals as an alternative investment.

The U.S. Dollar Index, heading for its biggest monthly drop this year, fell today on speculation gains in equities spurred demand for higher-yielding assets. Precious metals typically move inversely to the U.S. currency. Gold is set for its best month since November.

“Extreme dollar weakness is adding to the momentum,” Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said today in a note. “Ascending oil prices, concerns of inflation and fears of massive U.S. debt have certainly been supporting” both metals, he said.

Silver futures for July delivery climbed 2 percent to $15.46 an ounce on the New York Mercantile Exchange’s Comex division as of 8:32 a.m. in New York. The contract has rallied 25 percent this month. Silver for immediate delivery climbed 2 percent to $15.445 an ounce in London.

Gold futures for August delivery advanced as much as $15.30, or 1.6 percent, to $978.50 in New York, the highest since Feb. 25, and are up 9 percent this month. Gold for immediate delivery rose $13.45, or 1.4 percent, to $972.90 in London.

The metal rose to $972 in the morning “fixing” in London, used by some mining companies to sell production, from $957.75 at yesterday’s afternoon fixing.

Economic Outlook

European and Asian equities climbed today. The MSCI World Index is set for a third consecutive monthly increase, the first such gain since the credit crisis began in August 2007, as investors speculated the $12.8 trillion pledged by the U.S. government and the Federal Reserve will end the first global recession since World War II.

Silver “is very correlated to gold, but silver does have industrial application that gold doesn’t,” Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, said today by phone. “The ‘green shoots’ story is more positive for silver. It’s a very small market compared to gold. Even small amounts of money coming in can move up the price a lot.”

An ounce of spot gold in London now buys about 63 ounces of silver, the lowest ratio since September, according to data compiled by Bloomberg. That compares with 84 in October, the highest level since March 1995.
By Nicholas Larkin and Glenys Sim
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