Silver rose 1 percent on Friday, snapping a five-day losing streak that cut prices by almost a third, while gold rose after encouraging US jobs data triggered a broad bounce in beaten-down commodities. Silver suffered the biggest sell-off since the 1980 collapse in prices following the Hunt Bothers squeeze, triggered by a succession of margin hikes that nearly doubled costs.
But dealers said the 35 percent slide from last week's record high was overdone, an excited response in an overheated market. Precious metal prices rallied early in tandem with other markets after data showed private-sector hiring hit a five-year high in April. But metals pared gains when the dollar surged against the euro after a German media report suggested Greece had raised the possibility of leaving the euro zone. Greece denied the report.
"There is no reason why silver should have taken such a big hit. It's all margin-related," said COMEX floor option trader Dominic Cognata. Spot silver initially traded as low as $33.22, its lowest level since February 25, pressured by follow-through selling after it plunged 12 percent on Thursday. It was up 2 percent at $35.35 by 1:43 pm EDT (1743 GMT).
The price of the US June silver contract fell as much as 13 percent on Thursday, leading a broad decline in the commodities sector. On Friday, June was down over 2 percent. Silver has slumped around 35 percent since touching a record high of $49.51 an ounce on April 28. A major factor behind the sell-off was higher margins for silver traded on the Chicago Mercantile Exchange Group, which raises trading costs.
Investors rushing to exit the market trimmed their positions in the iShares Silver Trust, the world's biggest silver-backed exchange-traded fund, which suffered outflows of more than $1 billion in the week ended Wednesday. Gold also bounced on Friday as jewellers, physical buyers and bargain hunters, especially in Asia, took advantage of lower prices. Spot gold gained 1.5 percent to $1,494.50 an ounce, still sharply below a record high of $1,575.79 posted on May 2. COMEX June gold futures gained $13.20 to $1,494.60.