Dollar may feel sting after G7 complains about China

Section:

By Richard Irving
The Times, London
Saturday, April 22, 2006

http://business.timesonline.co.uk/article/0,,9072-2146207,00.html

Barclays Global Investors (BGI), the British investment firm,
insisted yesterday that it would go ahead with a new fund targeting
US speculators in the $60 billion (34 billion) a day silver market,
despite a second day of tumultuous losses which have wiped more than
one fifth off the value of the precious metal in the last two days.
A spokeswoman said the company was committed to launching the fund,
despite the rout in the metals markets.

Silver tumbled to $11.60 an ounce in early morning dealings in
London, after hitting a 23-year high of $14.68 on Thursday. Dealers
pushed the price to within a sliver of $15 an ounce on Thursday
morning, partly on hopes that BGI would buy huge supplies of silver
bullion to back the launch of the new fund.

The spokeswoman declined to say when the vehicle will be launched,
citing confidential talks with regulators in the US, where the
security will mainly be marketed.

However, she insisted that volatility in silver prices would not
deter BGI from proceeding with the product: "The launch of our
silver-based investment fund does not hinge on recent market
conditions. ... We originally filed the product with US regulators
in May 2005. There are a number of regulatory hoops that we still
have to go through but that is not contingent on prevailing
markets."

The precious metal recovered some poise yesterday, after initially
extending Thursday's losses to more than 20 per cent as speculators
who had gambled that silver would punch its way through $15 an ounce
cut their losses in the wake of profit-taking by longer-term
investors.

One dealer told The Times: "People are still digging out from
yesterday's fallout. Frankly, we never thought we would end the week
at anything below $15 an ounce. Given that we're now looking at the
$12.60 level, I think it's fair to say that some people are going to
have a pretty bad weekend."

Taso Anastasiou, a technical analyst at UBS, the Swiss investment
bank, poured further gloom on the outlook, warning clients that
silver prices were still prone to further selloffs: "Short-term, you
could look for a move down towards about $11.30 and potentially down
to the $10.39-$10.40 level."

However, rivals urged that it was too soon to call an end to a
remarkable bull run that has seen the price of silver rise by more
than 68 percent this year alone. Karen Jones, an analyst at
Commerzbank, suggested that prices might start edging forward again
after a period of stabilisation: "Even though we have seen such an
agressive selloff, we haven't damaged the underlying bull market."

... Versatile asset

Sterling silver is used for jewellery and silverware, where
appearance is paramount. This alloy contains 92.5% silver, the
remainder is copper or another metal.

Silver nitrate and silver bromide are used for traditional
photography but not for digital.

Silver is is also used in dental alloys, solder and electrical
contacts; for high capacity silver-zinc and silver-cadmium
batteries.

Silver can be used to back mirrors because it is the best known
reflector of light, but tends to corrode.

Silver paints are used in making printed circuits.

Medallions and commemorative coins often employ silver but the metal
is rarely used for traditional coinage: it is far too expensive to
make practically sized coins and wears faster than nickel.

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