Spot Silver breaks to nine-month best, tracks Gold as US credit concerns spark safe-haven buying

May 22nd, 2009

By Melanie Burton

Spot silver broke to its best since last August on Friday in Europe, as an influx of safe-haven buying was sparked by renewed concerns over the credit ratin of US government debt after ratings agency S&P downgraded Britain's credit outlook on Thursday.

Spot silver jumped 47 cents or 3.3 percent to $14.72 an ounce -- its best since August 14 last year when it peaked at $15.12 an ounce. The metal has risen 29 percent this year -- but remains some way under its 28-year high of $21.26 from last March.

Momentum in silver, considered by investors as a cheaper version of gold -- was triggered by credit market concerns as well as dollar weakness -- the same factors that have driven gold to two-month peaks today above $955 an ounce.

After ratings agency Standard and Poors downgraded Britain's credit outlook due to the massive fiscal stimulus spent to contain the global downturn and unfreeze the credit markets, investors are concerned that the US may fall next in line.

This along, with news of another Treasury auction by the US Federal Reserve -- which would release more dollars into the market, pushed the US currency to its cheapest this year against the euro, making the metals cheaper for holders of other currencies, and also increasing their allure as an inflation hedge.

The Bullion Desk

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