Source: Reuters
London— Silver prices held near their highest in more than 22 years on Monday, buoyed by expectations of more demand and hopes of a new investment fund being approved, while gold was steady in a tight band.
Silver might jump further in the event of the launch of the fund, proposed by Barclays Global Investors, which is designed to be backed by physical metal.
"Lots of speculation regarding the Barclays ETF (exchange traded fund) is just driving prices higher. There is still a lot more upside potential," said James Moore, precious metals analyst at TheBullionDesk.com.
Silver hit a high of $10.43 an ounce on Friday on hopes the U.S. Securities and Exchange Commission might soon approve the proposal. Silver, used in jewellery, photography and electronics, has risen 18 percent since the start of this year.
Such funds are traded on stock exchanges and designed to reflect market prices. Investors can buy or sell a share, backed by metal kept in vaults, without taking physical delivery.
Spot silver
Dealers pegged the upside target at $10.50 in the near term but said low liquidity in the market meant prices could easily move in either direction.
"There is little evidence that the … rally this year is really justified from a fundamental point of view," Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's Heraeus, said in a report.
"The gains are rather a result of an increase in speculative demand, mostly in anticipation of the possible launch of a silver ETF, he said."
Gold in tight band
Gold, which failed to capitalise on silver's gains last week, traded in a range of $6 an ounce. But the metal was expected to gain in the long run.
Spot gold
"We see some positive factors that could potentially bring prices near the top of this range," said Yingxi Yu, analyst at Barclays Capital, referring to a trading band of $535-$575 in recent weeks.
"We have been turning quite negative on the dollar over the past week and we see some further downside potential for the dollar," she said.
The dollar held close to last week's 7-week low against the euro as expectations lingered the Federal Reserve might be close to ending a series of interest rate hikes, started in June 2004.
A weak dollar makes gold cheaper for other currency holders.
Gold rose to its highest in 25 years at $574.60 on Feb. 2 as investors diversified into the precious metal on worries about rising oil prices, tension in the Middle East and uncertainty over the dollar's outlook.
The physical market lacked activity, with dealers struggling to attract buyers even though gold has dropped more than 3 percent in value since spiking to a 25-year high above $574 an ounce in early February.
Gold demand in India, the world's largest consumer, might remain subdued this week on abundant stocks held by wholesalers and high prices, analysts in Mumbai said.
In other precious metals, platinum
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