--EU progress sends silver, gold higher
--Traders look ahead to U.S. employment, manufacturing data next week
By Tatyana Shumsky
NEW YORK (Dow Jones)--Silver futures rose 5.1% Friday, while gold retook the $1,600 level, as investors cheered surprising signs of progress in Europe's battle to contain its bank crisis.
Precious metals prices surged amid a broad market rally as investor appetite for risk returned to the market.
European Union leaders announced plans to let the bloc's rescue funds directly recapitalize troubled banks and make the European Central Bank the region's sole banking supervisor.
"This was blockbuster news because most people didn't expect anything, or at leas nothing substantive," said Bill O'Neill, a principal with Logic Advisors.
"This was definitely a big surprise to the markets. We've been living with a risk-off mentality and this was definitely a relief rally," Mr. O'Neill added.
Precious metals investors have closely followed Europe's worsening bank crisis, with gold and silver futures facing selling pressure as investors opted to hold more liquid assets like the dollar.
The progress from the two-day EU summit in Brussels eased fears that Europe's debt problems would be mired in bureaucratic stalemate between debt-laden countries and their wealthier, but more austere neighbors.
Gold for August delivery, the most actively traded contract, climbed back above the psychologically important $1,600 level. The contract settled up $53.80, or 3.5%, at $1,604.20 a troy ounce on the Comex division of the New York Mercantile Exchange.
Silver, which had traded at a 19-month low a day earlier, increased 5.1%, or $1.333, to settle at $27.580 a troy ounce.
"It just has bounced completely off it," said Joe Kobel, a market strategist with RJO Futures. He added that with more optimism in the market following surprise progress in the euro zone, silver futures are surging.
Looking ahead, the coming week will likely see very volatile trading in precious metals as U.S. investors face a shorter trading week, due to the July 4 Independence Day holiday, Mr. O'Neill said.
"You have to be very careful of these one-day rallies," Mr. O'Neill said,
Traders will also be watching for monthly U.S. employment data and for U.S. manufacturing reports, which could add to turbulence, he said.
-Nicole Friedman contributed to this article.
Write to Tatyana Shumsky at tatyana.shumsky@dowjones.com