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Silver Futures, Gold Ride Rally Wave

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February 21^st, 2012

Silver futures ended at a three-month high and gold rallied Tuesday amid elation over the long-awaited Greek bailout deal and a weaker dollar.

European officials agreed to extend Greece a €130 billion bailout package in order to avoid a messy default and keep the country in the currency bloc. Private-sector creditors will take a 53.5% haircut on the value of Greek government bonds, helping put the country back on the path toward sustainable debt levels.

The most actively traded gold contract, for April delivery, rose $32.60, or 1.9%, to settle at $1,758.50 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the highest settlement price since Feb. 2.

The rest of the precious-metals complex followed gold's cues, with silver posting a settlement high for the year at $34.429 a troy ounce. The precious metal rallied up 3.7%, or $1.213, a troy ounce, ending trade at the highest level since Nov. 15.

The Greek deal comes after months of wrangling and delays as European officials and Greek leaders struggled to find solutions to the country's debt problems.

The euro rallied on the news, giving dollar-denominated gold a boost. The single European currently was recently trading at $1.32245, up from $1.3186 earlier. Gold is priced in dollars and tends to attract more buyers who use foreign currencies when the greenback weakens as the metal appears less expensive to these buyers.

"Most of the pickup in precious metals was owed to a weaker dollar," said Marc Ground, metals analyst with Standard Bank, in a note.

Nymex platinum and palladium also locked in strong gains on the day. Platinum for April delivery rallied 3.1% to $1,684.90 a troy ounce, while palladium finished up 3.3% at $710.75 a troy ounce.

Platinum is getting added support from supply disruptions in South Africa, where a strike at Impala Platinum Holdings Ltd. has resulted in about 80,000 troy ounces of lost output, the company said Monday.

"The loss of more than 80,000 ounces of platinum production at Impala's Rustenburg mine is not going unnoticed," said Jon Nadler, senior metals analyst with Kitco Metals Inc. North America.

 - Tatyana Shumsky at Dow Jones.

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