Silver and palladium swing higher as dollar outlook dims on US deficit concerns

By Melanie Burton

Sept. 22 (FastMarkets) --Silver hit its highest since September 1 on Monday while palladium soared 9.5 percent to its best in ten days, as the dollar fell back after the US Federal Reserve's massive fund injection to calm financial markets raised questions about the country's longer term fiscal health.

Spot silver jumped to an intrasession high of $13.45 an ounce, up 84 cents or 6.6 percent from Friday's close, before falling back to $13.25/$13.27 an ounce recently. Likewise, palladium prices jumped to $254 an ounce, up $22 from Friday and its most expensive since September 8. Gold, to which the metal's usually look for direction, was bid at $892.40/892.90 an ounce, up 2.2 percent from Friday but having gained over 10 percent last week.

The dollar dropped to a three-week low against the euro Monday on concern that a US $700 billion buyout of troubled assets from financial institutions will widen the country's budget deficit, following buy backs of failed insurer American International Group Inc last week, amid the collapse of investment brokerages Merrill Lynch and Lehman Brothers.

Silver, platinum and palladium have been hammered over summer with all metals down near half of their March highs as a slowing global economy impairs demand expectations, while cash-strapped investors exit commodities to fund positions elsewhere.

Broker Citibank Monday downgraded its palladium price forecast by 18 percent to $365 from $445 earlier for this year on the view that industrial demand for palladium from the automotive sector is struggling as automakers both sides of the Atlantic chop sales forecasts.

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