Silver bounces from 12% fall, gold up ahead of US jobs

Silver rebounded on Friday from its biggest one-day dollar fall since 1980, and gold also recovered as cheaper prices lured in Asian investors keeping a wary eye on US employment data due later in the day.

Silver slumped 12% on Thursday after another margin hike by the CME Group on COMEX silver futures, dragging gold down 3% and triggering a brutal sell-off that sent commodities from oil to copper sharply lower.

Buyers in Asia have taken the opportunity to enter a market that has seen spot gold fall more than USD 100 off a record high in just four days and spot silver shed 30% from a 31-year peak of USD 49.51 hit on April 28. Spot silver rose by 2.5% to USD 35.54 an ounce, snapping a five-day losing streak. It is still on track for a 26% weekly loss, its biggest since the early 1980s.

COMEX silver fell more than 5% to USD 34.27 in early trade, before regaining some ground to USD 35.55. It was poised to lose 27% over the week in its sharpest fall since March 1980, when an attempt to corner the silver market by the Hunt brothers, two Texas oil tycoons, fell apart.

"Prices have dropped so much over the past few days and bargain hunters are in," said Ong Yi Ling, an analyst at Phillip Futures, adding that the weak outlook for US employment data helped add to the lure of gold. US payroll growth likely eased in April as employers responded to rising gasoline prices by scaling back on hiring, economists said.

A worse-than-expected figure could further fuel the commodities sell-off by deepening fears that the world's largest economy is not out of woods yet, although it could benefit gold as a safe haven. "Gold is a better bet than silver or oil, as losses would be capped by its safe-haven status," said Ong of Phillip Futures.

Investors rushing to exit the market trimmed their positions in the iShares Silver Trust, the world's biggest silver-backed exchange-traded fund, by more than 1% after a 5% decline the previous day. Holdings stood at 10,268.92 tonne by May 5, the lowest since early November.

Spot gold rose by more than 1% to USD 1,489.26 an ounce, headed for a 5% drop from a week earlier, its worst week since March 2009. COMEX gold gained 0.5% to USD 1,489.40 an ounce.

"From a fundamental point of view, people are really starting to question where the US economic recovery is and whether asset prices should be at such high levels," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney. "When we roll off the stimulus in June, what next? Is the US economy going to fall flat or behave itself?"