Expectations on ETF ruling push silver to 22-year high
Chris Flood and Delphine Strauss
Published: January 28 2006 Financial Times

Silver set the pace for commodity markets this week, reaching a 22-year high of $9.76 a troy ounce yesterday, on hopes that a new exchange traded fund (ETF) would attract significant investor interest.ADVERTISEMENT

Barclays Global Investors is awaiting US regulatory approval for a silver ETF, and this generated higher trading volumes.

Silver rose 7.9 per cent over the week to $9.56/$9.59a troy ounce and dealers reported buying of March silver options at $12 yesterday.

" There is a serious risk that the silver price could ramp up by 25 per cent over the next couple of months, driven by supply concerns," said Paul Merrick at RBC Capital Markets. With inventories low and falling, some fear an ETF could drive the market into a serious deficit.

Gold ETFs, which allow investors to trade without the inconvenience of having to store or deliver the physical metal, have grown rapidly over the past year to accumulate 424.7 tonnes.

Gold traded at $557.00/$557.75 a troy ounce, below its recent 25-year high of $567.60. Dealers said the price had held up well in a volatile week with much lower volumes traded.

Platinum hit a record $1,065 per troy ounce yesterday after a gain of 3.2 per cent this week, helped by positive investor sentiment, strong price momentum and expectations that diesel engines would win market share in the US.

Three-month copper increased 1.5 per cent to $4,847.5 a tonne, just short of its record peak of $4,850, as LME stocks fell below the critical 100,000 tonnes level.
Nick Moore of ABN Amro called on China's State Reserve Bureau to disclose the size of its inventoriesof copper and other commodities after it said it would ban trading in derivatives following a suspected scandal last year. "The copper market swings on a few hundred thousand tonnes of copper [stocks], so the actions of the SRB have been pivotal in the price behaviour."

Aluminium hit a new record of $2,525 a tonne yesterday before easing back to $2,500, up 5.1 per cent this week. Aggressive profit taking hit zinc and lead on Friday. Zinc hit a record $2,315 a tonne on Thursday but retreated to $2,250 yesterday.Lead fell 6.8 per cent to $1,275 a tonne. Nickel rose 5.5 per cent on the week to $15,400 in spite of a large increase in LME stocks on Friday, pointing to oversupply. Technical analysts said if resistance levels at $15,500 could be challenged, then $17,000 was next.

Oil prices heated up again on Friday amid concerns over possible supply disruptions from Nigeria and Iran.

Nymex March West Texas Intermediate jumped $1.24to $67.50 a barrel whileIPE March Brent added98 cents to $65.90 a barrel.

Sugar prices moved sharply higher in New York with the March 2006 contract reaching 18.82 cents a pound before settling at $18.73.

Freezing weather in central Europe pushed IPEFebruary gas oil up to $556.00 per tonne. IPE front month natural gas rose to 63.50p per therm amid supply concerns.