(Kitco News) - Silver hit its highest level in 30 years Monday on the first trading day of the New Year, boosted with other industrial commodities and equities on optimism about the economy.

Shortly after 10 a.m. EST, most-active March silver was 14.8 cents, or 0.5%, higher at $31.085 an ounce on the Comex division of the New York Mercantile Exchange. It peaked at $31.275. Nearby but lightly traded January silver was up 15 cents, or 0.5%, to $31.06 and hit a high of $31.195.

“The stock market is making new recovery highs and world markets are holding together,” said Charles Nedoss, senior market strategist with Olympus Futures. “So silver has the best of both worlds.”

The metal continues to benefit from its role as a precious metal, particularly with worries about potential for eventual inflation, Nedoss said. Meanwhile, it also benefitting from expectations for increased industrial demand as the economy recovers.

“So silver is hitting on all cylinders,” he said. “I think we’re in a situation where silver will probably start to outpace gold.”

Frank Lesh, futures analyst at FuturePath Trading said the strength that lifted silver last week is rolling over to 2011 as normal trade resumes after the holidays. “We’re projecting (higher) prices for the moment,” he said.

George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures, said industrial commodities in general are stronger, with copper, platinum and crude oil also rising in early trade and the Dow Jones Industrial Average higher by roughly 100 points and hitting a two-year high.  Asset allocation is occurring on the first trading day of the New Year and quarter, Gero said.

“There is optimism on the economy and the continued stimulus. There is a general uptick in most commodities,” Gero said, citing strength in grains, in particular.

Precious metals continue to benefit from disillusionment over fiat currencies and silver is benefitting from that, and from its industrial use side, said Mike Daly, gold and silver specialist with PFGBest.

“Silver has become a blue collar safe-haven market. If you have a nominal amount of money to invest, say a thousand or a couple of thousand, you’ll get more bang for your buck buying silver. You can’t even buy a gold coin for $1,000 anymore,” Daly said.

The gray metal has a reputation for volatility and often leads rallies and breaks. Daly said silver has been a “gunslinger’s” market because of the market’s erratic trade. However, he said, the past six months has changed because volume has picked up which makes the market more liquid. Silver’s volume used to average between 10,000 and 15,000 contracts, he said, but lately it’s been averaging 70,000 to 80,000 contracts as global demand rises.

With silver holding over $30 an ounce, it appears the market is building a base of support at that area. That could set it up for a move to $35 where it could run into short-term resistance, Daly said. As long as the current bullish views on silver hold, he said the all-time highs around $50 an ounce could eventually be tested.

Lesh agreed that $50 could be where silver is headed, given the momentum in prices.

Whereas gold held much of the spotlight in 2010, silver seems to be moving out of the yellow metal’s shadow and Lesh attributed that to the maturity of the gold bull market. “It’s now grown so large, it’s going to be harder to move that market. It’ll take more and more buying. Silver is smaller and it will be able to produce more gains than gold. Plus everyone is squawking about the gold-silver ratio, that silver is undervalued,” he said.

The gold-silver ratio measures how many ounces of silver can buy an ounce of gold. As silver rallies the ratio between the two metals is narrowing.

Below the market, the initial chart support for March silver would be the 10-day moving average of just over $30 an ounce, Nedoss said. Below this, he cited the 20-day average around $29.60.

By Allen Sykora and Debbie Carlson of Kitco News asykora@kitco.com dcarlson@kitco.com

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