Silver rallies to May 2006 levels

Silver rose to the highest since May 2006 in London as the dollar slumped to a record low against the euro, spurring demand for precious metals as an alternative investment.

The dollar fell on speculation that the finance industry losses will prompt the US Federal Reserve to cut interest rates for a third time this year. Silver has gained 15 per cent this year as the US currency dropped almost 10 per cent against the euro.

The metal also rose after gold traded close to a 27-year high, said Alexander Zumpfe, a trader at Germany-based Heraeus Metallhandels, said. Heraeus owns five precious-metal refineries.

Silver for immediate delivery rose as much as 19 cents, or 1.3 percent, to $14.90 an ounce. It traded at $14.89 as of 9.31 am local time, taking its gain this year to 15 per cent.

Gold for immediate delivery jumped 1.1 per cent to $815.08 an ounce. Earlier, it rose as much as $9.10, or 1.1 percent, to $815.60, the highest since January 1980. The metal climbed to $850 in January 1980.

Silver also advanced as Peruvian miners yesterday began their second national strike in six months after the government failed to meet demands on pensions, profit-sharing and rights for subcontracted workers. Peru is the world's biggest silver producer.