NEW YORK Silver soared to an all-time high on Thursday and gold rose to another record, as the dollar fell and as signs that the Federal Reserve would maintain a loose monetary policy stoked inflation worries.
Silver briefly climbed to within a whisker of $50 an ounce, eclipsing the peak hit when Texan brothers William Herbert and Nelson Bunker Hunt sought to corner the silver market three decades ago. The metal later pulled back on technical selling.
Option traders reported strong buying of long-dated in-the-money silver calls, indicating bullish investor expectations. Also, the value of gold in terms of silver fell to less than 32 ounces on Thursday, the lowest on record, according to Reuters data dating back to 1982.
"I don't think the market has topped out. While there are some inflation concerns similar to what we had back in 1980, the reality is that metals are going up as an alternative asset featuring gold, and by proxy silver," said Bill O'Neill, partner at commodities firm LOGIC Advisors.
Spot silver, which has rocketed nearly 60 percent so far this year, rose 1.6 percent to $48.53 an ounce by 3:29 p.m. EDT (1929 GMT), having earlier hit a record $49.51 an ounce, surpassing a peak of $49.48 on January 18, 1980 set during the Hunt brothers era.
A U.S. jury found that the Hunt brothers conspired to manipulate the prices of silver in 1979-80. During that time the price of U.S. silver futures soared from below $11 an ounce to a record $50.35, then tumbled back to around $11.
Soaring prices hurt the bottom line of certain manufacturers, including photography company Eastman Kodak EK.N, which said on Thursday a hike in raw material costs, particularly silver, led to a decrease in its film business revenue.
"We are indexing our contracts, we are hedging, and we are moving as fast as we can with the part of the portfolio that is not silver-dependent," Chief Executive Antonio Perez told analysts, explaining its strategy to manage prices.
Despite a continued decline in the film photography sector, which used to be a major silver buyer, industry typically consumes half of the global supply of the metal.
U.S. GROWTH SLOWS, INFLATION RISES
Spot gold rose to a lifetime high of $1,538.35 an ounce, breaking records for the ninth time in 10 sessions. It was later up 0.6 percent at $1,535.60 an ounce. U.S. June gold futures settled up 0.9 percent at $1,531.20.
Precious metals rose after data showed U.S. economic growth braked sharply in the first quarter as higher food and gasoline prices dampened consumer spending, sending inflation rising at its fastest pace in 2-1/2 years.
Adjusted for inflation, however, the current price of silver is about two-thirds below its record at over $130 an ounce, while gold was only a third below a peak of $2,200. Both records were set in 1980.
Silver has surged 11 percent in just the last two days, even after Monday's technical failure that almost sent prices toward $50 before pulling back sharply.
Year to date, silver was up almost 60 percent, currently the best-performing commodity, sharply above gold's 8 percent gain.
SILVER OPTIONS SEEN BULLISH
On the silver options front, heavy buying of call options indicated investors continued to bet silver prices would rise further.
"I am seeing all types of bullish call buying. They are in the money and far out, including December, March and September calls," said COMEX options floor trader Dominick Cognata. "They are looking to buy cheap call spreads because this thing looks like it may shoot up to $70 or $80."
Gold and silver's rally was supported by follow-up buying after Federal Reserve Chairman Ben Bernanke signaled on Wednesday that the U.S. central bank is in no rush to scale back its support for the economy.
"The metal markets are recognizing that (Fed policy) and it is being priced in. What monetization means is that, down the road, we will have more inflation," said Robert Lutts, chief investment officer of Cabot Money Management, which oversees more than $500 million in client assets.
In platinum group metals, platinum gained 0.8 percent to $1,834.40 an ounce, while palladium rose 1.3 percent to $773 an ounce.
(Additional reporting by Doris Frankel in Chicago, Liana Baker and Christopher Kelly in New York, Rebekah Curtis and Amanda Cooper in London and Lewa Pardomuanin Singapore; Editing by Marguerita Choy and Dale Hudson)