Silver Drawing Speculative Heat

CNBC, Patti Domm - Silver is poised to break its 31-year highs as the metal draws increasingly more speculative heat.

"I think what you're starting to see is a tremendous amount of speculation in the market, and it's being driven by the silver ETF. Yesterday, the silver ETF traded more than the SPDR (S&P 500 ETF)," said Kevin Grady, a metals trader with MF Global.

In fact, the silver ETF, iShares Silver Trust traded nearly 180 million shares Thursday, well above its 10-day average volume of 104 million and more than three times last week's average volume of about 50 million. The SPDR S&P 500 ETF trailed again, trading about 120 million shares Thursday, less than its daily average volume of more than 140 million.

"I think overall when you see so many people coming in and day-trading a market, it usually means you're setting up for a correction," said Grady. He said it would not be surprising to see a 10 percent correction, like earlier this week, but the trend still looks higher.

"What I can say is the silver market remains supported by the fact that it's illiquid, relative to gold. We haven't seen a great decline in industrial demand, and that's because it's pretty inelastic."