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PRECIOUS-Gold rises over 1 pct, silver soars to 31-year high

Published 04/14/2011, 04:44 PM
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* Weak dollar, oil gains, renewed Greek worry help gold

* Silver hits 31-year high above $42 on speculative buying

* Gold gains as Fed officials see no immediate tightening

* Coming up: U.S. March consumer prices on Friday (Recasts, adds comments, link to graphic; updates market activity)

By Frank Tang

NEW YORK, April 14 (Reuters) - Gold rose over 1 percent to a near-record and silver surged on Thursday as dollar weakness, inflation worries and a European debt crisis powered bullion to its biggest one-day gain in about seven weeks.

Silver futures soared to their highest since 1980, rising more than 4 percent for their biggest one-day gain since November, as strong investment and speculative buying sent the gold/silver ratio to a low.

Gold received a boost from inflation worries triggered by a crude oil rally and data showing rising U.S. core producer prices in March, and as higher-than-expected jobless claims knocked the dollar. [ID:nN14146589]

"The combination of higher oil prices, weaker dollar and the resurrection of discussions of Greek sovereign risk problems has galvanized the gold market. It's particularly impressive because we ran into selling above the market yesterday," said James Steel, chief commodity analyst at HSBC.

Spot gold rose 1.4 percent to $1,474.30 an ounce by 4:02 p.m. EDT (2002 GMT), within striking distance of its record $1,476.21 set on Monday. U.S. gold futures for June delivery settled up $16.80 at $1,472.40 an ounce.

Investors grew jittery on talk of debt restructuring by Greece, the first euro zone member to receive a bailout a year ago in the crisis that has driven Ireland and Portugal to seek aid and forced draconian budget cuts in Spain. [ID:nLDE73D0XQ]

The European debt crisis has boosted gold this year and also helped power the metal's 30 percent gain last year.

Bullion investors took heart as the dollar fell broadly, reaching a record low against the Swiss franc, with more weakness likely so long as U.S. Federal Reserve and European Central Bank policies continue to diverge. [FRX/]

The recent surge in oil prices is no prelude to broader price increases that would force the Fed to raise interest rates, top Fed officials said on Thursday in what appeared to be the predominant view at the central bank. [ID:nN14167673]

Comments by the Fed officials strengthened expectations the central bank will stay on course with its $600 billion debt-buying program and not look to reverse its super-easy monetary policy any time soon.

Gold prices have almost doubled since the Fed cut interest rates to the bone in 2008 in an attempt to shock the economy back to life after the worst financial crisis since the Great Depression.

SILVER RATIO LOWEST IN NEARLY 3 DECADES

Silver climbed 3.5 percent to $42.03, having hit a 31-year high at $42.07 an ounce. (Factbox: [ID:nLDE73D1BQ])

The spread between gold and silver -- showing the relative strength between the two metals -- has nearly halved since last August. The gold-to-silver ratio fell to just above 35, the lowest since the early 1980s.

(Graphic: http://link.reuters.com/cum98r)

"Silver continues to attract a very large speculative bid. Even though silver is far out-gaining gold, the reasons why precious metals rally are related to the financial factors that surround the gold market," said Bill O'Neill, partner at commodities firm LOGIC Advisors.

Silver has rallied about 35 percent year-to-date on talk of near-term supply tightness as a recovering global economy boosts demand for the industrial metal.

"There is still a lot of speculative, investment money coming into the gold market. Until there is a clear technical signal that the situation is reversed, the momentum of silver remains intact," HSBC's Steel said.

Platinum gained 1.2 percent to $1,791.24, while palladium rose 1.4 percent to $771.50. Prices at 4:02 p.m. EDT (2002 GMT)

LAST/ NET PCT YTD

CLOSE CHG CHG CHG US gold 1472.40 16.80 1.2% 3.6% US silver 41.664 1.427 0.0% 34.7% US platinum 1795.60 18.40 1.0% 1.0% US palladium 774.25 8.95 1.2% -3.6% Gold 1474.30 19.69 1.4% 3.9% Silver 42.03 1.41 3.5% 36.2% Platinum 1791.24 22.09 1.2% 1.3% Palladium 771.50 10.87 1.4% -3.5% Gold Fix 1465.75 8.25 0.6% 3.9% Silver Fix 40.67 45.00 1.1% 32.8% Platinum Fix 1772.00 12.00 0.7% 2.4% Palladium Fix 763.00 8.00 1.0% -3.5% (Additional reporting by Jan Harvey in London; Editing by Dale Hudson)

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