Silver and gold were within sight of historic highs on Friday and could resume an uptrend as the US dollar held near three-year lows against a basket of currencies on hopes US monetary policy would stay ultra loose, keeping inflationary price pressures high.
A fresh batch of US economic data in the form of rising claims for jobless benefits failed to rescue the dollar, which had dropped to its weakest level since July 2008 against other currencies before recovering slightly.
Silver barely moved, standing at 48.32 an ounce by 0234 GMT (10:34 p.m. ET on Thursday), having rallied to a record at $49.51 an ounce on Thursday. Gold lost $1.10 to $1,533.85 an ounce after hitting a lifetime high around $1,538 an ounce in the previous session.
"If the dollar continues to weaken, then it's only likely to boost gold as well as silver as the inverse relationship between the two assets persists. I would say that for gold I am still looking for it to hit $1,600 this year," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.
"In the long term, I think if we see silver prices at such a high level, then it could hurt the industrial demand."
But dealers said strong investment demand for silver would keep the metal at record levels, while a lack of scrap sales in the physical market suggested that investors expected more gains. Year to date, silver was up almost 60 percent, sharply above gold's 8 percent gain.
A bullish target at $1,549 per ounce is still intact for spot gold, based on its wave pattern and a Fibonacci projection analysis, according to Wan Tao, who is a Reuters market analyst for commodities and energy technicals.
"There's some selling but I would say it's very light," said a dealer in Singapore, who trades gold and silver. "It had been a very busy week, and I am glad today is Friday. It's all quiet, finally."
The CME Group Inc, parent of the Chicago Board of Trade, said on Thursday it would raise maintenance margins for COMEX 5000 Silver futures by 13.2 percent, making it more expensive for silver speculators to trade in.
Soaring prices hurt the bottom line of certain manufacturers, including photography company Eastman Kodak, which said on Thursday a hike in raw material costs, particularly silver, led to a decrease in its film business revenue.
Trading was subdued in Asia, with Japanese financial markets shut for a public holiday. UK markets will be closed for the royal wedding. Premiums for gold bars were steady in Hong Kong and Singapore.
The dollar index, which tracks the currency's performance against a basket of major currencies, stood at 73.065 on Friday, having plumbed a three-year low of 72.871 on Thursday.
Sentiment for the dollar took a hit this week after the Federal Reserve said it was in no hurry to tighten its ultra-loose monetary policy, a move that gave investors the green light to keep using the dollar as a funding currency to buy higher-yielding assets.
"It all depends on the US dollar, but I would say we only see a small amount of selling in the physical market," said a dealer in Hong Kong.
In the energy market, US crude futures were steady in early trade on Friday, after rising to a 31-month high settlement in the previous session, as a weak dollar helped stem a slide in prices from slower economic growth in the United States in the first quarter.