Gold prices climbed and silver rose as much as 5 percent in Europe on Friday, recovering some of this week's heavy losses, as a drop in the dollar encouraged a rebound in the beleaguered commodities complex.
Oil prices rose more than $1 a barrel and base metals like copper also recovered, after commodities were hit by broad-based selling on Thursday on growth concerns and a rally in the U.S. currency, which made dollar-priced assets more expensive.
Spot gold was bid at $1,509.39 an ounce at 1138 GMT, against $1,502.35 late in New York on Thursday, while U.S. gold futures for June delivery rose $2.40 an ounce to $1,509.20. Silver was at $35.61 an ounce against $34.60.
"Today economic data out of the euro zone has been positive, which supported stock markets and the euro, and the dollar weakened, which is supportive for commodities in general, and in particular the precious metals," said Peter Fertig, a consultant at Quantitative Commodity Research
"But the market is still very nervous about the recent volatility and sell-off in commodities. Economic forecasts might be revised to the downside," he said. "It is still a bit early to conclude that we are now in recovery."
Heavy selling of silver on Wednesday and Thursday, directly following the metal's worst one-week slide on record last week, helped drag gold lower. The metal has plunged by more than a third since hitting record highs at $49.51 late last month.
Precious metals prices were helped by a decline in the dollar on Friday, with the U.S. unit slipping 0.3 percent against the euro in early afternoon trade.
The single currency benefited from strong growth data in France and Germany, which supported the view that a healthy euro zone economy would keep interest rates in the region higher than those in the United States.
German gross domestic product rose 1.5 percent in the first three months of 2011 from the quarter before, above forecasts for a 0.9 percent rise, while French GDP rose 1.0 percent. German Bunds fell, reflecting firmer risk appetite in Europe.
ETF REPORTS OUTFLOW
But softer investment interest in gold was reflected in a fresh outflow in holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust. The trust reported a 7-tonne outflow of bullion on Thursday.
The fund's gold holdings have fallen by 36.5 tonnes so far this month, and are down 87.6 tonnes since the beginning of the year, worth some $4.264 billion at today's prices.
The largest silver ETF, the iShares Silver Trust, reported that its holdings slipped another 24.3 tonnes on Thursday. Although silver is outperforming other precious metals on Friday, it is expected to suffer further losses.
"Silver prices have been volatile with wide price swings occurring almost every day this month," said HSBC analyst Jim Steel in a note.
"We still look for silver to stabilize but believe that silver price will weaken relative to gold prices, based on rapid increases in silver mine supply. We anticipate the silver/gold ratio will trade back up to 1:50 from its current 44:1."
The Shanghai Gold Exchange said on Friday it will cut silver margin requirements back to 18 percent from 19 percent from May 13 settlements if there is no sharp movement in prices.
The surge in speculative silver trade in Shanghai is being blamed for the rapid rise and subsequent crash in silver prices over the year.
Platinum was at $1,771.24 an ounce against $1,762.15, while palladium was at $713.97 against $710.90.
London Platinum Week starts on Monday, bringing together industry players from across the world.
