Silver rose to its highest price in more than 22 years on Wednesday on buying by money managers after US regulators gave the go ahead for a proposed exchange-trade fund in the precious metal.
Fund managers bought silver after the Securities and Exchange Commission said it had approved rule changes to allow the American Stock Exchange to list shares in Barclays Plc's iShares Silver Trust.
The exchange-traded fund (ETF), which will be backed by silver held in vaults in London, is expected to soak up much of the available supply of the metal and boost demand and prices as it brings fresh investment to the market, dealers say.
Spot silver rose to $10.57 per ounce, its highest level since October 1983. The metal was trading around $10.53/10.56 late in New York on Tuesday. "The range will remain wide and volatile, but even at the $10.50 level, it seems there's a bit of support down there.
Why is silver so firm? I think you know what the answer is. It's because of the ETF thing," said a dealer in Singapore. EFTA's are designed to closely reflect the price of an underlying market or commodity, such as a stock index or gold.
They trade like listed stocks. Shares in iShares Silver Trust will be issued in baskets of 50,000 shares or multiples thereof. Silver, used in jewellery, electronics and photography, has risen nearly 20 percent since the start of 2006 in anticipation of the ETF.
"The jewellery side is all reluctant to chase the market at this level because demand does shrink. But more investor interest is piling into silver," said the dealer in Singapore. "Gold is a bit of a lagger right now.
I think most dealers think silver will lead gold," he said. Spot gold was quoted at $552.30/553.20 an ounce, steady from $551.80/552.70. On the Tokyo Commodity Exchange, the key most-distant February gold futures contract, rose four yen per gram to 2,111 yen ($17.9), mainly due to a weaker yen.
Spot gold has repeatedly failed to breach a key resistance of $560, making it hard for the metal to retest a 25-year high of $574.60 hit in February. Dealers said investors had began selling gold in favour of silver but some analysts said the rally in silver may not last in the absence of buying by the jewellery sector.
"Obviously, the funds will be looking to speculate and make some money out of this. But I am still of the opinion that the spike might be somewhat short-lived," said Darren Heathcote, head of trading at N M Rothschild in Sydney. Jewellery and silverware account for around 30 percent of the market, some estimates suggest. At current high prices, demand could stagnate as owners of silverware and old jewellery cash in on the high price and recycle their metal rather than buy new silver.
Platinum rose to $1,036/1,041 an ounce from $1,035/1,039 in New York. Palladium was steady at $314/319 an ounce.
Comments
Comments are closed.