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Silver rallies closer to $50, gold gains as buyers keep coming

April 25, 2011 |  1:01 pm

The price of silver made a run for the $50 mark on Monday, the previous nominal peak reached 31 years ago, as the wild bull market in precious metals rolls on.

April silver futures in New York traded as high as $49.10 an ounce but fell back to close at $47.15, up $1.09 for the session, or 2.4%.

The more active May silver contract made it closer to $50, trading as high as $49.82 before retreating.

Silverroyals Gold closed at a new nominal high (meaning, before adjusting for inflation), rising $5.40 to $1,508.60 an ounce in New York. Gold had closed above $1,500 for the first time on Thursday.

Traders pointed to the usual suspects behind the rally, including a falling U.S. dollar, inflation fears, worries about mounting government debt burdens and continued unrest in the Middle East and North Africa.

The DXY index of the dollar's value against six other major currencies slipped 0.2% to 73.99, its lowest level since August 2008. It's down 6.4% year to date.

For investors who have doubts about the future worth of paper currencies, gold and silver are the obvious hard-currency alternatives.

And of course, sheer momentum also is driving the metals’ prices: The higher they go, the more interest they attract from people who want a piece of the action.

“It’s Mom and Pop buying and it’s also professionals,” said Phil Flynn, market analyst at PFG Best Research in Chicago.

New market rumors about future Chinese government purchases also stoked demand Monday.

Amazingly, silver has risen in 14 of the last 15 sessions, and gold has gained in 13 of the last 15.

Silver, dubbed the poor man’s gold, has rocketed almost 10% just in the last week and is up 52% year to date. “It’s gone crazy in the last week,” said Bart Melek, a commodities strategist at TD Securities in Toronto.

Gold, by contrast, is up 6.2% year to date -- about the same as the gain in the Standard & Poor’s 500 stock index.

Silver’s all-time high, before adjusting for inflation, was around $50 an ounce early in 1980, when the Hunt brothers briefly cornered the market in the metal.

There is disagreement about what the actual peak price was in 1980, but many traders say it was in the range of $48 to $50.

“For all intents and purposes we came very close to it today,” Flynn said.

-- Tom Petruno

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Photo: A British Royal Mint silver coin issued for the Friday wedding of Prince William and Kate Middleton. Credit: Associated Press

 

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