Silver jumped to its highest for more than 22 years on Friday on hopes that a new investment instrument called an exchange-traded fund (ETF) will be approved and attract fresh money, dealers said.
But the metal surrendered most of the gains in the afternoon session in Europe after surging as high as $10.31 an ounce, its highest since October 1983.
"There has been a little bit of profit-taking. I think $10 is still the key," said James Moore, precious metals analyst at TheBullionDes.com.
"I don't think this is the end of it. We are going to see a correction and again looking to move higher in the following couple of weeks."
Spot silver was quoted at $10.19/10.22 by 1558 GMT, against $10.18/10.21 in New York. At its high, silver was 43 percent up from its level 12 months ago, having gained about 11 percent in the past two weeks alone.
"Silver's recent rally appears to have been driven by intensifying speculation that the proposed ETF will soon gain approval from the SEC, although we have seen no indications on the possible timing," John Reade, precious metals analyst at UBS Investment Bank, said.
"I suspect that the initial reaction to the positive news will see silver blast up a dollar or two dollars, and then I wouldn't be surprised to see some profit-taking ahead of the actual launch," he added.
Investors have poured money into silver, used mainly in jewellery, photography and electronics, on expectations the proposed fund would be approved by the US Securities and Exchange Commission (SEC).
ETFs are designed to reflect closely the price of an underlying market or commodity, such as a stock index or gold, and they trade like listed stocks on any exchange.
Gold ETFs, launched in the past three years, are becoming popular among investors. Five such funds world-wide have so far collected 467 tonnes of gold, equivalent to the 12th largest gold holding by a central bank.
Sources said in late February the US regulator was reviewing a silver-backed security from Barclays Global Investors called iShares Silver Trust.
"People watch silver because of the ETF stuff, then you had this strike news on top and the rest was just purely technical," said Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's Heraeus.
The huge Fresnillo silver mine in Mexico re-opened on Thursday after workers voted to end a one-day wildcat strike.
Analysts said an ETF might attract about 4,000 tonnes of silver in the first stage.
Gold rose to its highest in more than three weeks and moved closer to a recent 25-year peak of $574.60 an ounce before easing.
Spot gold rose as high as $570.50 an ounce before falling to $566.10/567.00, against $568.30/569.20 in New York.
Platinum rose to its highest in three weeks at $1,063 an ounce but was later quoted at $1,052.50/1,058.50, up from $1,050/1,054 in New York. Palladium rose to $298/302 an ounce from $296/300.
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