NEW YORK -- The spreading stain of the scandal at the Bank of Credit and Commerce International appeared to hurt the international silver market yesterday, pushing prices significantly lower.
Traders said a chain reaction apparently set off by an indictment in the case led to a huge sell-off of silver by a Middle Eastern holder of millions of ounces.
The sale, which was estimated by traders to have been between 5 million and 7 million ounces, pushed the market to a new low for the year. But it eventually regained some ground before the close of trading in the United States yesterday.
"The market basically just fell apart," said Peter Cardillo, director of research at Westfalia Investments in New York.
"The market recouped from its lows, but this has done some real major technical damage," he said.
On New York's Commodity Exchange yesterday, July silver closed at $3.873 an ounce, down 15.5 cents, to the lowest levels since December 1991. During the trading day, the contract hit a low of $3.82 an ounce.
Traders and analysts attributed the dumping in the Middle East to a forced sale of silver brought about by the resignation of the chief operating officer of Saudi Arabia's biggest bank, the National Commercial Bank.
The executive, Sheik Khalid bin Mahfouz and an associate, Haroon Kahlon of London, were indicted last week in New York on charges of defrauding customers at BCCI of $300 million. Sheik Khalid resigned his position at the Saudi bank yesterday to devote his time to fighting the charges.
The heavy selling from the Middle East was just the latest in the woes of the silver market, which has been struggling unsuccessfully for months to gain upward momentum as the economy has grown stronger.