Silver prices jump on physical demand from Asia

Singapore (July 29)  Silver rose on Monday, boosted by strong physical demand from Asia. Despite a significant slump in precious metal prices this year, Asia's richest keep increasing their holdings. Both gold and silver suffered heavy losses after the US Federal Reserve (Fed) hinted it may taper its stimulus. As a result, investors will eye the Fed's monthly policy meeting starting on Tuesday, with expectations that the central bank will hint at when it will start scaling back its stimulus measures.

Silver futures rose 0.47% to $19.865 at 1:47pm GMT, trimming an earlier 2% gain on a strengthening dollar ahead of US home sales data. Silver reached an intraday high of $20.200 an ounce. Silver has lost around 34% so far this year, while gold is down more than 20%. Gold futures gained 0.55% to $1,328.70 an ounce at the same time.

Malca-Amit Global is opening a new silver vault this week in Singapore. The company said that the vault, which has a capacity is 200 metric tons or $128 million at current prices, is 30% booked. The company further said that they see a strong demand, as the number of rich people in the Asia-Pacific region is growing rapidly. Silver investors are mostly private individuals, while the majority of gold holders are institutions. Silver holdings in exchange-traded products (ETPs) stood at 19,222 tons on July 26, up 1.6% in 2012, according to data compiled by Bloomberg. ETPs allow investors to trade assets without taking delivery, while physical holders require storage, such as a vault.

Holdings in the SPDR Gold Trust, which is the world's biggest gold-backed exchange-traded fund, remained unchanged at 927.35 tonnes on Friday. The volume of holdings fell under 1,000 tonnes in June for the first time in more than four years.

Fed, non-farm payrolls awaited

The Fed's two-day policy meeting starts on Tuesday, with investors bracing for any hints on how long the central bank is likely to keep its monthly stimulus measures.

Hedge funds and money managers recently increased their bullish bets in gold futures to a four-month high on the back of hopes that the central bank will hold its interest rates low for longer, according to a report by the Commodity Futures Trading Commission released on Friday last week.

Fed Chairman Ben Bernanke said earlier this month that it was too early to decide whether to start winding down the bank's bond-buying program in September and that the bank will maintain its accommodative monetary policy for the foreseeable future.

Meanwhile, the Bank of England and European Central Bank also hold their policy meetings later in the week.

On Friday, the US non-farm payrolls report will be released with expectations that US employers added 192,000 jobs in July, while the unemployment rate is forecast to drop to 7.5% from 7.6%.

The Fed noted that conditions in the labor market are a major component for deciding when to reduce the pace of its monthly measures.

Labor data last week showed US initial jobless claims increased to 343,000 in the week ended July 13, from the upwardly revised 336,000 in the previous week, highlighting the stubbornly high unemployment in the world's number one economy.