NEW YORK, June 3 (Reuters) - COMEX silver rose to a new 1-1/2 year high in holiday-thinned trade on Monday, enjoying spillover buying from a rally in gold on the back of a tumbling stock market and struggling dollar, dealers said.
After a weak start to trading, July silver ended up 3.8 cents at $5.08 an ounce. The contract touched $5.01 and beat Friday's peak by three cents on the way to $5.10, its highest value since Dec 6, 2000.
"We had a little bit of follow-through here with gold. That's why you got it up to $5.10," said a floor broker. "There's been some light trade buying here pushing us into covering some shorts. If the dollar takes another good dip, we may just break that $5.10 (level)."
Spot was last at $5.07/09, its highest in two years, up from $5.01/03 at Friday's close.
New York trade was thinned by the absence of London bullion dealers for Britain's spring bank holiday on Monday, which was extended for a second day this year in celebration of Queen Elizabeth's Golden Jubilee. The next bullion fix will be Wednesday when UK markets reopen.
"It started out quietly, obviously with London out, and people were playing it a little bit from the short side covering all the way up," said a bullion dealer.
Silver is focused on gold, rather than the weak stock market, which in the past has undermined prices because of silver's use as an industrial metal.
On Wall Street, the Dow Jones industrials were down 91 points in mid-afternoon trade, with gold a beneficiary of the outflow from U.S. assets.
August gold also reversed early losses, then backed off its high. It settled up 20 cents at $327.70 an ounce after trading $325.90-$329.50. On Friday, August hit a contract high at $330.20 an ounce, while spot was fixed at its highest in almost five years at $327.25.
Spot gold was last quoted at $326.40/90, unchanged from Friday's New York close.
Dealers expected no rush to cash in the massive long positions accumulated in gold and silver this year. Global jitters, a tumbling dollar, and producer buybacks have created a huge comfort zone for gold bulls.
The Commitments of Traders report released by the CFTC after the close Friday showed the net noncommercial, or fund, long position in gold was pared to 41,323 contracts from 46,914 in the week to last Tuesday.
But gold continued to climb Wednesday-Friday and small investors seemed to have been in the drivers seat for the last legs of the rally. These "non-reportables" are not usually strong hands and are often considered to be the last to jump onto a move before a trend change.
They increased their net long position by 4,380 lots to 46,109, and are now hold more gold futures than big funds.
There has also been talk in recent days of heavy Indian physical buying to protect wealth in case of War with rival nuclear power Pakistan over disputed Kashmir.
Pakistan President Pervez Musharraf arrived on Monday at an Asian security summit and offered "unconditional" talks with neighboring India to resolve their tense military standoff.
But Indian Prime Minister Atal Behari Vajpayee, already at the summit, has said no meeting with Musharraf was planned during the 16-nation Asian security summit in Kazakhstan. Delhi demands an end to cross-border raids by Islamic militants.
NYMEX July platinum gained $1.50 to $547.40 an ounce. Spot platinum was quoted $542.50/549.50.
September palladium rose $3.85 to $352 an ounce. Spot palladium fetched $346/361.