Silver hits new 22-year peak, gold extends gains

Silver reached a new 22-year peak on Monday on persistent hopes that a proposed exchange-traded fund (ETF) will prompt significant demand for the precious metal.

Other metals also extended gains, with palladium surging to a two-year peak and gold rising to three-week highs.

"People are obviously very positive about silver and the ETF. I don't see anything standing in the way of silver trading to $11 (an ounce) very quickly within the next day or two," said John Reade, precious metals analyst at UBS Investment Bank.

"To get more, larger and sustainable gains, we do need to see how much money is going to be attracted by the launch of the ETF," he added.

Spot silver rose as high as $10,86 an ounce, its highest since September 1983, before easing to $10.,85/10,88 by 09:42 GMT. It closed at $10,72/10,75 late in New York on Friday.

Silver has gained more than 22% in value this year on expectations the silver-backed security will attract demand for the metal, which is mainly used in jewellery, photography and electronics.

The US Securities and Exchange Commission last Tuesday paved the way for final approval of the first silver ETF that would track the metal's price.

Some analysts said the fund had potential to attract up to 4 000 tonnes of silver, which would equal nearly two months of consumption.

"There will be more fresh money coming into silver but one must always be vigilant. Everyone is now talking about the much-dreaded pullback but so far we haven't seen anything yet," said a dealer in Singapore.

Dealers said firm base metals also helped sentiment.

Other precious metals also drifted higher, with palladium rising to $332 an ounce, the highest since April 2004, before marginally easing to $330/335. It closed in the US market at $328/333.

Platinum rose to its highest in three weeks to $1,054 an ounce before retreating to $1 053/1 058 an ounce, higher than $1 045/1 049 in New York.

Spot gold increased to a three-week high of $563,50/564,40 an ounce, up from $560,00/560,90.

Taiwan's first gold futures contract closed firmer on the first day of trade on Monday, with investors watching to see if volumes would be high enough to attract continued interest.

Analysts said comments by a Bank of China official that the country should use part of its fast-growing foreign exchange reserves to buy gold, were also positive for the market.

Dubai's commodity exchange will start trading deliverable silver futures contracts on Tuesday to tap growing global demand for the metal.

Posted: 3/27/06

Source: Mining Weekly

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