* US silver reverses after topping $49/oz in record volume
* Silver flat after CME raises margins; volatility spikes
* Price rally, volatility spook silver manufacturers
* Spot gold moving up and down in tandem with silver
* Coming up: US May silver options set 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 as
speculators sharply took profits near the $50 psychological
level, silver later found its footing again. The metal traded
largely flat, steadying at just below $47 after the CME Group
raised the maintenance margins of silver futures by 9.2
percent. []
Gold prices also recoiled from early gains of nearly 1
percent after touching a seventh successive record high with
volatility spiking to its highest since November.
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
[]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
"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 1.4 percent at $47.34 an ounce by
3:39 p.m. EDT (1939 GMT), sharply below a session high of
$49.31.
Spot gold <XAU=> was at $1,509,60 an ounce, up 0.4 percent,
well off an a record high of $1,518.10 set earlier in the
session, in tandem with silver's reversal. U.S. June gold
futures <GCM1> settled up $5.30 at $1,509.10 an ounce, in a
range from $1,502.20 to $1,1519.20.
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, topping 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.
Analysts said silver's rally was backed by new source of
demand from solar panel manufacturers in addition to
traditional strongholds including electronics and photography
amid a recovering economy. However, extreme price fluctuations
could hurt demand.
"We are constantly researching and developing production
methods to minimize key resource inputs, including silver, to
drive down the costs of production," said Stuart Wenham, chief
technology officer of Suntech Power Holdings Co Ltd <STP.N>,
the world's top solar panel maker.
Wenham said that the recent rise of silver prices with
increasing volatility highlights the importance of the
company's R&D initiatives.
OPTION VOLATILITY SPIKES
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.
A key technical indicator, silver's 14-day relative
strength index, is warning of a further correction in the
silver market after the precious metal got within $1 of its
all-time high on Monday and traded at levels not seen in more
than 30 years. []
On gold, the CBOE gold volatility index <.GVZ>, a gauge of
bullion investor anxiety, surged to about 17 percent, its
biggest one-day gain since November last year.
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.
In platinum group metals, platinum <XPT=> was up 0.6
percent at $1,821 an ounce, while palladium <XPD=> eased 0.7
percent at $760.47 an ounce.
Prices at 3:39 p.m. EDT (1939 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=> 1509.60 6.05 0.4% 6.4%
Silver <XAG=> 47.34 0.67 1.4% 53.4%
Platinum <XPT=> 1821.00 10.20 0.6% 3.0%
Palladium <XPD=> 760.47 -5.01 -0.7% -4.9%
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 David Sheppard and Angela Moon in New
York, Doris Frankel in Chicago, Rujun Shen in Singapore;
Editing by Marguerita Choy)
