Source: MarketWatch
San Francisco— Silver futures closed Tuesday at their highest level since late 1983, up 2% for the session, after a proposed silver exchange-traded fund took a step closer to its potential trading launch.
The Securities and Exchange Commission has approved a rule change for a silver exchange-traded fund in registration from Barclays Global Investor that would allow the product to list on the American Stock Exchange.
The ETF, however, has not yet been cleared to launch by regulators.
Christine Hudacko, a spokeswoman for Barclays, said the comment period on the silver ETF's proposed rule change recently closed, and the SEC order says the product can now list on the Amex.
However, she said the S-1 registration statement submitted by BGI has not taken effect yet. "This takes the process one step further, but we're still in the quiet period and no launch date has been determined," Hudacko said. See ETF Focus story.
May silver futures tacked on 20.3 cents to close at $10.565 an ounce, touching a fresh 22-year high of $10.58. It tapped a low of $10.155 earlier in the session.
The proposed ETF is "the best news for silver since the Hunt brothers tried corning the silver market," said Peter Grandich, editor of the Grandich Letter, referring to the duo that tried to corner the silver market and pushed silver to $50 around 1980.
Gold at one-week low
Gold futures, however, had a weak trading day Tuesday with strength in the U.S. dollar easing some demand for the precious metal.
"Increases in oil inventories and a firmer dollar put a dent into gold prices early Tuesday," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com. "Gold fell about 1% before recovering slightly and stabilizing."
"For the time being, the trading crowd is going with the 'safe' bet –sell gold, buy a few dollars," he said. "Until, of course, the next set of less-than-positive economic data is released."
April gold fell to a low of $547.60 an ounce on the New York Mercantile Exchange, an intraday level not seen since March 14. It closed down $2.90 at $553.20 an ounce.
"Gold and silver continue to defy the bears by quick bouts of profit-taking, followed by a sharp rises that wipe out most, if not all the losses," said Grandich. "This is classical secular bull market patterns."
Dollar strength
Weakness in the precious metal came as the dollar edged modestly higher against its major rivals, following Monday's comments from Federal Reserve Chairman Ben Bernanke that were interpreted as suggesting that further monetary tightening is to be expected.
The greenback also found support from a bigger-than-expected rise in the core producer price index. See Economic Report.
"For now, gold feels steady in the current $548-$560 range, with physical buying providing good scaled-down support," said James Moore, an analyst at TheBullionDesk.com.
But "dollar strength and easing oil prices may prompt another bout of long liquidation in gold short term, potentially leading the metal back towards $535," he said in a note to clients.
Overall, "the direction of the U.S. dollar is going to be the main current that causes [gold's] ebbs and flows," said Grandich, who said he believes the "dollar has completed its countertrend rally and is now resuming its secular bear market decline."
Gold managed to find some modest support earlier Tuesday after Germany's Bundesbank said it won't sell any gold from its reserves in the second year of a bullion sales agreement with other European central banks.
"This had largely been expected, though there was reportedly some speculation in the market to the contrary," said economists at Action Economics.
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