SINGAPORE (Reuters) - Gold rose on Friday as mounting worries about a Greece debt default prompted buying from investors, while silver gained more than 2 percent after tumbling from a two-week top in the previous session.
Gold may revisit a recent three-week top before profit taking kicks in, while silver — which has outpaced gold and is heading for its best weekly gain since late April at more than 7 percent — will continue seeing volatile price movements, analysts said.
Spot gold added $6.29 an ounce to $1,524.39 an ounce by 0517 GMT as Greece fights to avoid a debt restructuring. Gold touched a record around $1,575 in early May.
“It’s still the expectation that there’s a possibility for a Greece default and a greater safe-haven buying coming to the precious metal such as gold and silver,” said Ong Yi Ling, investment analyst at Phillip Futures in Singapore
“With gold prices actually close to a three-week high, then perhaps you could also see some profit taking and some closing of the bullish position later in the day,” she said.
Silver rose 41 cents to $37.65 an ounce in thin trade after hitting a high around $38. It had rallied to a two-week high at $38.84 on Thursday before hitting a low around $36 as speculators booked profits. Silver struck record at $49.51 an ounce in April.
“I guess for silver, it’s a lot of speculation and a lot of volatile movements. I would expect that to continue. We’re not seeing the longer-term investors really coming back into the market yet,” said Ong of Phillip Futures.
“It’s pretty much speculation and volatility going forward.”
Holdings on the largest silver-backed ETF, New York’s iShares Silver Trust, dropped 0.51 percent earlier this week and remained unchanged at 9,941.33 tonnes on Thursday.
Holdings have fallen by nearly 9 million ounces this week alone, bringing year-to-date outflow to 8.4 percent, or 42.79 million ounces.
The gold-silver ratio, used to measure how many ounces of silver can buy one ounce of gold, was at about 40 after falling to around 31 in late April, its weakest since early 1980s.
Precious metal prices continued to be supported by jitters over Greece’s debt problems that could have a big ripple effect across other high risk-European countries struggling with gaping fiscal deficits.
The International Monetary Fund could withhold the next slice of aid to Greece due next month, the head of euro zone finance ministers said on Thursday, spooking markets with the possibility of a default.
Overall trading was slow in the bullion market ahead of the U.S. Memorial Day holiday weekend. COMEX June gold futures rose $3.3 an ounce to $1,526.1 an ounce.
The dollar tumbled broadly on Friday after weak U.S. economic data dragged the 10-year Treasury yield down to a six-month low overnight, with the greenback’s drop gaining steam on a flurry of stop-loss selling.
“I think people are cautious about silver after seeing what happened yesterday. There’s only a slight amount of physical buying. It’s a holiday in the U.S. next week, so people may square off positions tonight,” said a dealer in Hong Kong.
“But I think sentiment is still bullish for gold because of the problems in Greece.”
Gains in gold lifted platinum around 1 percent to a high of $1,784 an ounce, but activity in the physical market has yet to pick up in Japan after the devastating earthquake, tsunami and nuclear disaster in March.
Platinum bars were offered at a discount of $1.5 to the spot London prices, unchanged from last month.
Toyota Motor Corp and Honda Motor Co saw their global production slump to around half of year-ago levels in April after the March 11 earthquake and tsunami wreaked havoc with their supply chains.
In other markets, the Nikkei edged lower on Friday, pulled lower by a stronger yen and a drop in Sony Corp shares, while Brent crude rose on a softer dollar and tensions in the Middle East.