Gold up on euro optimism, silver outshines

A modest gold rise was eclipsed by a 4 percent surge in silver on Friday, with investors optimistic about the technical picture and prospects for a Greek deal soon with private bondholders. Bullion gained even as the euro and other commodities fell, after banking officials told Reuters the agreement between Greece and its creditors was near, which could prevent the debt-stricken nation from tumbling into a chaotic default.
It was gold's third straight weekly rise. However, even after a 6-percent rally year-to-date, analysts said investors remain cautious about the metal after it briefly entered a bear market in December despite rampant speculation about a break-up of the euro. "The expectation of a Greek debt agreement certainly takes the dark looming cloud off the market," said David Meger, director of metals trading at futures brokerage Vision Financial Markets.
"Gold and most notably silver are both having technical breakouts, which are indicative of strong physical demand in the market," Meger said. Spot gold was up 0.3 percent at $1,662 an ounce by 2:40 pm EST (1940 GMT). Its early session low came in tandem with a decline in riskier assets. US gold futures for February delivery settled up $9.50 at $1,664 an ounce. Trading volume came below its 30-day average for a second straight session, bucking a recent trend of strong turnover. Gold has had a strong start to the year so far after a 10 percent price drop in December.
SILVER OUTPERFORMS GOLD Silver rose 3.7 percent to $31.67 an ounce, also up for a third consecutive week. Technical buying accelerated after COMEX March silver futures broke above stiff resistance at $30.50 an ounce, Meger said. Meger said physical silver demand has picked up in recent weeks, boosted by retailers chasing better price momentum. Indeed, US Mint data showed that sales of silver American Eagles totalled 5.3 million ounces on Friday, on pace to surpass its record high of 6.4 million ounces set in January 2011.
Dealers said silver coin sales were brisk even after considering January sales are usually higher than other months due to a consumer preference for new year's edition. Gold's ratio to silver - the number of silver ounces needed to buy an ounce of gold - slipped to two-month low on Friday at 52 as silver prices outperformed gold. Spot platinum was up 0.8 percent at $1,527.49 an ounce, while spot palladium eased 0.7 percent at $669.78 an ounce.