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By Melissa Pistilli-Exclusive to Silver Investing News

Monday brought positive price actions in precious metals as gold and silver climbed to seven-week highs on a falling dollar and commodities rally fueled by economic optimism.

Growing sentiment of economic recovery in the markets was boosted by promising global manufacturing reports, specifically out of China, the U.K., the U.S. and Europe, that show demand for commodities like raw materials is on the rise. The recent reports spurned a rise in commodities prices to their highest level for the year.

The recent optimism flooding into the market is a boon for commodities and a blow to the dollar.

The greenback has taken a hit as capital flows out of the “safe-haven” currency and into riskier assets. The dollar fell to a 10-month low Monday against a basket of six other major currencies as stock markets across Asia, Europe and North America rallied on investor confidence. The S&P 500 index closed over the 1,000 level for the first time in nine months.

Inflation concerns are back on the scene and that is always good for silver prices. On Friday, the price of silver closed slightly below the important $14 per ounce level. On Monday, silver broke through the psychological barrier rising as high as $14.47 (its highest since mid-June) to close at $14.21 per ounce.

Industrial demand for silver has taken a lift from surging commodities prices, but investment demand is on the rise as well. Fresh inflows into ETFs late last week, helped push prices higher. iShares Silver Trust reported its holdings reached a record 8,828 tonnes on and Switzerland’s Zurich Cantonal Bank’s holdings gained 3.8 per cent, or 1.929 million ounces.

For now, movement in the dollar and oil will continue to shape the outlook for silver and gold, according to several analysts including Eugen Weinberg of Commerzbank, Jon Nadler of Kitco Metals and Anna Coulling of Forex.

Many analysts anticipated precious metals to dip on Tuesday on profit-taking and pared losses in the dollar. However, by 2:00 PM EST, silver was up 2.67 per cent to $14.63 per ounce.

In her “Spot Silver Price” report, Coulling suggests silver’s price move is showing “clear evidence of bullish market sentiment” after jumping the key resistance level of $14 yesterday.

Despite the bullish air lingering over the markets as of late, analysts are reminding investors to be cautious. “That the global economy is climbing out of the subprime cave is one thing; that it remains extremely fragile given what has transpired, is another story altogether,” warns Kitco’s Nadler.

Nevertheless, notes Coulling, as long as this return to “positive risk appetite” persists, “spot silver prices should continue to climb.”

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