(Reuters) - Spot silver surged more than 5 percent to just above $49 ounce on Monday, buoyed by a weak dollar and strong physical demand in Asia that also propelled gold to a record high for a seventh consecutive session.

U.S. silver futures jumped 8.2 percent to $49.82 an ounce in unusually large trading volume, just about 50 cents off its all-time peak of $50.35 hit on Jan. 18, 1980.

"Everyone is buying," said a Hong Kong-based dealer. "There is stop-loss buying, as well as a good buying interest from China."

Spot silver hit a 31-year high of $49.25 an ounce, and was trading at $48.82 by 0643 GMT. It was heading for its biggest daily gain in five months.

Silver prices have climbed nearly 60 percent so far this year, after jumping more than 80 percent in 2010, outpacing gold's 7 percent rise and the 10-percent gain in the 19-commodity Reuters-Jefferies CRB index.

Silver's astounding run has attracted big and small investors.

Holdings in the world's largest silver-backed exchange-traded fund, iShares Silver Trust , have risen by 2.4 percent so far this year, compared to a 4 percent decline in the holdings of SPDR Gold Trust, the world's top gold ETF.

Buying interest in physical silver has also jumped in India, where gold is traditionally favoured as a storage of wealth.

"The rally has been great as traders are buying silver like mad," said an official at a private bank in India.

"We normally don't import silver on a regular basis, but we imported about 10 tonnes from last month. Investors are joining in the rally in India to catch on the price appreciation."

Spot gold hit a record high of $1,517.71 an ounce, before easing to $1,515.65, up 0.8 percent.

U.S. gold futures also rose to an all-time high, at $1,518.6.

"It's the dollar play," said a dealer based in Singapore.

The dollar index languished around its three-year low on Monday, with investors expecting further weakness as the upcoming Federal Reserves' policy-setting meeting is likely to announce the continuation of low interest rates.

The escalated violence in Syria and Yemen over the weekend also helped lift gold, seen as a safe haven during time of turmoil.