April 28, 2011 / 9:58 AM / 7 years ago

PRECIOUS-Silver hits record near $50, first time since 1980

 * Silver hits record high near $50 first time since 1980
 * Spot gold hits record for a second day as dollar drops
 * Inflation, economic uncertainty cited after Bernanke
 * Coming up: U.S. personal income on Friday
 (Adds Kodak quote in paragraph 8)
 By Frank Tang
 NEW YORK, April 28 (Reuters) - 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.
 Take a Look on rise of gold, silver [ID:nLDE73E15G]
 Graphic on silver as best-performing commodity:
 FACTBOX-Gold milestones to record high [ID:nL3E7FL0IO]
 Special PDF report on gold, silver rally:
 India silver recycling to curb imports [ID:nL3E7FQ1Z8]
 Spot silver XAG=, 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 Jan. 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. [ID:nN28229826]
 "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.
 Spot gold XAU= 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 GCM1 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. [ID:nCAT005418]
 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
 On the silver options front, heavy buying of call options
indicated investors continued to bet silver prices would rise
 "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 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. [ID:nN26291565]
 "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 XPT= gained 0.8
percent to $1,834.40 an ounce, while palladium XPD= rose 1.3
percent to $773 an ounce.
Prices at 3:27 p.m. EDT (1927 GMT)    
                          LAST/      NET    PCT     YTD
                          CLOSE      CHG    CHG     CHG
US gold         GCM1     1531.20    14.10   0.9%    7.7%
US silver       SIK1      47.520    1.562   0.0%   53.6%
US platinum     PLN1     1839.90    20.70   1.1%    3.5%
US palladium    PAM1      775.30    17.20   2.3%   -3.5%
Gold            XAU=     1535.60     9.20   0.6%    8.2%
Silver          XAG=       48.53     0.77   1.6%   57.3%
Platinum        XPT=     1834.40    14.95   0.8%    3.8%
Palladium       XPD=      773.00     9.55   1.3%   -3.3%
Gold Fix        XAUFIX=  1535.50     4.50   0.3%    8.9%
Silver Fix      XAGFIX=    48.70   340.00   7.5%   59.0%
Platinum Fix    XPTFIX=  1835.00    15.00   0.8%    6.0%
Palladium Fix   XPDFIX=   777.00     8.00   1.0%   -1.8%
 (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)

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