* Spot silver jumps 7 pct, spot gold 1 pct before paring
gains
* U.S. markets closed on Monday for Independence Day holiday
(Adds comments, updates prices)
By Vijaykumar Vedala
BENGALURU, July 4 (Reuters) - Gold eased off a near two-year
high, while silver breached the $21 level for the first time
since July 2014 in highly volatile trade on Monday, prompted by
a burst of short-covering in China.
Spot gold XAU= rose about 1 percent at one point to touch
a session best of $1,357.60 per ounce. This was close to the
$1,358.20 level reached on June 24, the highest since March
2014, when global markets went into a tailspin in the wake of
Britain's vote to exit the European Union.
Spot gold was up 0.6 percent at $1,350.36 an ounce as of
0712 GMT. U.S. gold GCcv1 was up 1.1 percent at $1,353.40.
Silver XAG= soared 7 percent at one point to $21.107, the
highest since July 2014, before retreating to $20.41.
"There is a little bit of a two-way battle going on in
silver with a number of players going short in China," said
Jeremy East, global head of metals trading at Standard
Chartered.
The Shanghai Exchange Futures went limit-up as onshore
players have aggressively been covering their short positions in
the last few days, especially on Monday, he said.
"Once the onshore market went limit-up, the short-covering
buying spilled over to the London market."
Chinese commodities from nickel to cotton surged on Monday
on hopes Beijing would unleash more stimulus to prop up a
sluggish economy, brightening the outlook for raw material
demand.
MKS trader Sam Laughlin said global uncertainty would likely
continue to fuel the recent rally in precious metals, but warned
that there could be sharp periods of volatility.
"The metal (silver) continues to be buoyed by its unique
position as both an industrial metal in risk-on conditions and a
safe-haven asset in times of uncertainty," Laughlin added.
Spot gold is expected to break a resistance at $1,351 per
ounce and rise more to the next resistance at $1,367, said
Reuters technical analyst Wang Tao.
Holdings in SPDR Gold Trust GLD , the world's largest
gold-backed exchange-traded fund, rose 0.41 percent to 953.91
tonnes on Friday, the highest since July 2013. GOL/ETF
"I think the rhetoric from now to the next three months will
be very important," said OCBC Bank analyst Barnabas Gan.
"By rhetoric I mean what we hear from the UK and Europe on
how they are going to go about the divorce between the UK and
European Union," the analyst said, adding that the suspense
should increase demand for safe-haven bids.
The U.S. markets are closed on Monday for the Independence
Day holiday.
Among other precious metals, spot platinum XPT= touched
its best since May 12, while spot palladium XPD= hit a
two-month high.