* U.S. silver reverses after topping $49/oz, then steadies
* Technical failure triggers heavy selling
* Spot gold up and down in tandem with silver, hits record
* Coming up: US May silver options to expire Tuesday
(Recasts, adds comments, updates market activity)
By Frank Tang
NEW YORK, April 25 (Reuters) - Silver surged as much as 8
percent on Monday before pulling back sharply when a failure to
pierce the all time high from 1980 unleashed a wave of
technical selling amid record volume in U.S. futures.
After briefly dipping into negative territory midmorning,
silver had found its footing in afternoon trade, up 1.8 percent
at $47.50 an ounce. Gold prices also recoiled from early gains
of nearly 1 percent after touching a seventh successive record
high.
The whipsaw in silver prices amid otherwise thin trading
market conditions was a stark reminder of the volatile nature
of this year's best-performing major commodity, which has
gained about 150 percent since the U.S. Federal Reserve
signaled new easing measures last August. Silver has risen for
nine straight days, matching a record winning streak from
2008.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Silver five-minute chart http://link.reuters.com/vyp29r
Graphic on gold, silver prices http://r.reuters.com/xup29r
Technical view on silver []
TIMELINE-A brief history of silver []
ANALYSTS VIEW-Silver's bull run seen to continue
[]
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"Silver has transformed itself from an inflation hedge to a
speculation tool," said Hakan Kaya, commodities portfolio
manager at Neuberger Berman, which manages about $190 billion
client assets. "At current prices, we find it highly overvalued
with no fundamental reasons backing it up."
While often overshadowed by gold, the smaller silver market
has handily outpaced the yellow metal's 25 percent gains over
the same period. Prices look set to challenge the record $49.48
an ounce from three decades ago when Texan brothers William
Hebert and Nelson Bunker Hunt sought to corner the market.
Spot silver <XAG=> was up 1.7 percent at $47.48 an ounce by
2:55 a.m. EDT (1855 GMT), sharply below a session high of
$49.31.
VOLUME AT RECORD HIGH
U.S. May silver futures <SIK1> jumped as much as over 8
percent to a intraday high of of $49.82 an ounce, just about 50
cents off its all-time peak for futures at $50.35 hit on Jan.
18, 1980. May settled up $47.149 an ounce, up $1.09.
U.S. silver volume surged to a record high, approaching
300,000 lots, more than doubled gold's turnover, preliminary
Reuters data showed.
Despite record futures volume, silver's initial rally was
not backed by active trade prior to its sell-off, with markets
in Britain, Canada and Australia shut due to the Easter Monday
holiday.
"Volume was very thin at near $50 Hunt brothers high. If
you are looking to lock in profit, $50 is a good psychological
number," said Sean McGillivray, head of asset allocation of
Great Pacific Wealth Management.
COMEX option floor trader Dominic Cognata said that
volatility in silver options "went through the moon" ahead of
Tuesday's May option expiration and Wednesday's conclusion of
the Fed's two-day policy-setting meeting.
Active option trade in iShares Silver Trust <SLV.P>, the
world's largest silver-backed exchange-traded fund, also
suggests some traders maybe betting on a sharp reversal after a
huge rally in silver prices.
"With the 14 day RSI (relative strength index) rising above
90 this morning in silver, reflecting the parabolic nature of
its recent move, all it took was a slight dollar bounce...to
get silver and other commodities to reverse course," said Peter
Boockvar, equity strategist at Miller Tabak & Co.
James Dailey, portfolio manager of the TEAM Asset Strategy
Fund <TEAMX.O> said that silver's technical charts are showing
signs of exhaustion, with strong volume recorded at its sharply
higher open and the subsequent reversal.
Spot gold <XAU=> hit a record high of $1,518.10 an ounce
earlier in the session. It fell in tandem with silver to
$1,509.51 an ounce. U.S. June gold futures <GCM1> settled up
$5.30 at $1,509.10 an ounce.
Prices at 2:55 p.m. EDT (1855 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCM1> 1509.10 5.30 0.4% 6.2%
US silver <SIK1> 47.149 1.090 0.0% 52.4%
US platinum <PLN1> 1828.10 7.40 0.4% 2.8%
US palladium <PAM1> 760.80 -8.25 -1.1% -5.3%
Gold <XAU=> 1509.51 5.96 0.4% 6.3%
Silver <XAG=> 47.48 0.81 1.7% 53.9%
Platinum <XPT=> 1821.24 10.44 0.6% 3.0%
Palladium <XPD=> 761.22 -4.26 -0.6% -4.8%
Gold Fix <XAUFIX=> 1504.00 -3.00 -0.2% 6.6%
Silver Fix <XAGFIX=> 46.26 147.00 3.3% 51.0%
Platinum Fix <XPTFIX=> 1812.00 2.00 0.1% 4.7%
Palladium Fix <XPDFIX=> 765.00 6.00 0.8% -3.3%
(Additional reporting by Angela Moon in New York, Rujun Shen
in Singapore; Editing by Marguerita Choy)
