The legendary American billionaire investor Warren Buffett disclosed he has bought 20% of the world's silver supply worth around £550m (US$900m)

Silver prices surged on Wednesday to a nine-year high of $7.075 an ounce after Mr Buffett, dubbed the $10bn man, revealed his holdings.

It is the first time since January 1988 that the price has surpassed the $7mark.

Mr Buffett began buying in July when silver was priced around $4 an ounce and now controls nearly 130 million ounces.

Since then, the metal's value has soared more than 62% but his investment fund, Berkshire Hathaway, is said to have classified the holdings as "long term".

The news that 67 year-old Mr Buffett who is also known as the "sage of Omaha" for his ability to make millions from forecasting markets, had amassed the holding caught the commodities market by surprise.

His investment decisions are usually followed by thousands of smaller investors and on this occasion, financial institutions who on Wednesday drove the price of silver up.

But most business commentators do not believe the billionaire is copying attempts by others in the 1970s to corner the market, most notably the Hunt brothers from Texas.

Nelson Bunker Hunt and William Herbert Hunt owned several hundred million ounces of silver but when the price later collapsed, the US Government was forced to step-in to avoid a wider financial collapse.

According to reports, however, the Bank of England has said it is "keeping an eye" on the silver market in London.

One report said that all Mr Buffett's silver had been bought through the London market and is stored there.

Last year's Forbes magazine estimated his net worth at $21 billion, putting him second only to Microsoft's Bill Gates in its ranking of the 400 wealthiest Americans.
 

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