Buffett caught up in silver price row

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Warren Buffett, arguably the world's most famous investor, was plunged into controversy last night after it emerged that a commodity trader which is fighting allegations of manipulation of the silver market brokered deals for the US billionaire.

Silver prices yesterday hit a 10- year high yesterday after Mr Buffett revealed he held 20 per cent of the world's annual silver supply. The surprise announcement sparked copycat buying across the globe.

Mr Buffett added that his purchases had been sourced through a single brokerage. But it was only last night that Phibro, the commodity trading arm of Salomon Smith Barney, admitted it was the broker in question.

Last month, Lovell & Stewart, the law firm, filed a class action lawsuit against Phibro, alleging the company had manipulated prices in the silver market. The allegations are denied by the company, and the New York Mercantile Exchange said there was "absolutely no basis" for the claims.

Silver prices have risen by 65 per cent since Berkshire Hathaway, Mr Buffett's company, began buying silver since last summer. In London yesterday, silver was trading at around $7 an ounce (pounds 4.40), valuing Mr Buffett's holding at $910m.

Dubbed the "Oracle of Omaha", Mr Buffett has gained an almost legendary status among small investors.

However, analysts warned that further increases in the silver price could trigger a price collapse, with the sale of substantial off-market silver holdings. Wiktor Bielski of Deutsche Morgan Grenfell reckons 70 per cent of the world's silver supply could be held off-market. The Bank of England yesterday said it was monitoring the situation.

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