US benchmark silver futures scaled a 22-year peak on Tuesday on brisk speculative buying after US regulators supported rule changes for the first silver-linked exchange-traded security.
The Securities and Exchange Commission said it has approved rule changes that will allow the American Stock Exchange to list shares in Barclays Plc's iShares Silver Trust, which is designed to track the price of the metal.
Before the Silver Trust shares can begin trading, however, the SEC would have to sign off on a registration statement allowing the shares to be publicly issued. "The registration statement has not yet been declared effective," said SEC spokesman John Heine.
Silver for May delivery at the Comex division of the New York Mercantile Exchange closed at $10.5650 per ounce, up 20.3 cents, or 2 percent, on the day. On Tuesday's high of $10.58 was the priciest level for futures since October 1983.
George Gero, vice president at RBC Capital Markets Global Futures, said heavy buying in silver was sparked by trader bullishness about the Silver Trust probably receiving final US regulatory approval in the near future.
"It seems like the SEC is favourable toward the Barclays silver ETF (exchange-traded fund) and they are moving ahead, and that I think was the major help to prices," he said. The silver ETF would be backed by silver bullion held in vaults in London, with each share worth about 10 ounces of silver.
Leading ETF provider Barclays Global Investors proposed the security last year.
Shares would be issued in baskets of 50,000 shares or multiples thereof and would be traded on the Amex like other securities, as is Barclays' iShares Comex GOLD Trust. The sponsor fee for the shares is set at 0.5 percent of the net assets of the trust, the SEC said.
John Reade, analyst with investment bank UBS, said silver prices may go higher if the ETF winds up triggering both substantial spot purchases and investor buying on fears of potentially decreasing liquidity in the global market.
"Silver has hit our one-month target of $10.50/oz but we believe that it can trade towards our three-month target of $11/oz very quickly. "Longer term forecasts will now be highly dependent on the investor interest in the ETF," he said.
Spot silver rose as high as $10.55 an ounce and was last indicated at $10.53/10.56, against $10.33/36 at Monday's late quote in New York. London bullion dealers fixed the daily spot silver reference rate at $10.28 an ounce.
Gold, meanwhile, finished lower as a firmer dollar pressured the safe haven precious metal. Comex April gold was down $2.90 at $553.20 an ounce, after dealing from $556 to a one-week low of $547. RBC's Gero said gold futures trading was dominated by rollover into the next active June contract from current benchmark April gold.
Spot gold slipped to $551.80/552.70 an ounce, against on Monday's late New York quote at $553.90/4.80. On Tuesday's late fix was $547.50. The dollar strengthened after a core gauge of US inflation for February core producer prices rose a more-than-expected 0.3 percent.
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