Silver rose above $30 (U.S.) an ounce for the first time since 1980 Monday as gold set a record high, but thin volume for both metals could indicate near-term weakness as some investors stayed on the sidelines ahead of the year end.
Gold and silver rose in a safe-haven play on the back of speculation U.S. authorities will extend monetary easing and lingering worries over euro zone debt, analysts said.
While gold has grabbed investors' attention this year with its rally to record highs above $1,420 an ounce, silver has quietly outpaced those gains. A $100 investment in silver on Jan. 1 would now be worth about $180, versus a gold investment's $130.
"The (silver) market is extremely well bid. The funds are obviously adding the support underneath the market," said Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC in Chicago.
"You've got dwindling above-ground stocks, you've got tremendous interest in the market, you've got the Fed now talking about QE3," McGhee said. He added silver has been playing catch-up to gold's rally.
Spot silver rose 2.5 per cent to $30.08 an ounce, having earlier hit a 30-year high at $30.25.
Spot gold rose 0.4 per cent to $1,419.65 an ounce. It climbed to an all-time high at $1,427.01 an ounce late in the U.S. session. U.S. gold futures for December delivery settled up $9.90 at $1,416.10 an ounce.
COMEX silver futures volume at 81,000 lots, almost 70 per cent below their 250-day average, while gold volume was at 140,000 contracts, more than 40 per cent below its 30-day average, as some trading desks and funds have already closed their books ahead of the year end.
"It seems like there are less players in the market, and that only seem to accentuate the trend because there is less volume...That's how you see a move in silver much grander than gold right now," said Mihir Dange, COMEX gold floor trader.
However, one analyst said that dwindling turnover for silver futures could signal price decline in the near term.
"Volume is key, and the low volume is suggesting this is a temporary, short-term top for silver," said David Morgan, founder of Silver-Investor.com.
The rally in silver - up nearly 80 per cent this year versus gold's 30 per cent gain - has narrowed the gold-to-silver ratio to less than 48, its lowest level since the first quarter of 2007 and a point at which more analysts were beginning to call silver overvalued.
Net long positions in U.S. silver futures held by speculators rose by 12 per cent in the week ended Nov. 30, as momentum traders jumped back into a market that has since then rallied to a 30-year high, according to the Commodity Futures Trading Commission data.
At over $30 an ounce, silver is at its highest level since 1980 when a physical squeeze briefly sent it above $50 an ounce in the Hunt Brothers' infamous attempt to corner the market. The Hunts were later convicted of conspiring to manipulate the market.
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For gold, its strength can be seen against currencies across the board, as gold hit record highs in U.S. dollar, sterling and euro terms, and Japanese yen-denominated bullion hit its highest since early 1983.
Gold benefited as a hedge against inflation after Federal Reserve Chairman Ben Bernanke said on Sunday the bank could buy more than the $600-billion in U.S. government bonds it has committed to purchase.
The euro snapped a three-day advance versus the dollar on Monday and selling pressure is likely to continue as doubts grew that European officials would find a common approach to ease the region's debt crisis.
Platinum slipped 0.3 per cent to $1,720.50 an ounce, while palladium fell 0.4 per cent to $755.47.