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LONDON, Mar 20 (Reuters) Silver prices held near their highest in more than 22 years on Monday, buoyed by expectations of more demand and hopes of a new investment fund being approved, while gold hovered in a tight band.

Silver might jump further in the event of the launch of the proposed Barclays Global Investors fund, which is designed to be backed by physical metal.

''Lots of speculation regarding the Barclays ETF (exchange traded fund) is just driving prices higher. There is still a lot more upside potential,'' said James Moore, precious metals analyst at TheBullionDesk.com.

Silver hit a high of $10.43 an ounce on Friday on hopes the U.S.

Securities and Exchange Commission might soon approve the fund.

Such funds are traded on stock exchanges and designed to reflect market prices. Investors can buy or sell a share, backed by metal kept in vaults, without taking physical delivery.

Spot silver was quoted at to $10.38/10.41 by 1056 GMT (1626 IST), up from $10.34/10.37 late in New York on Friday.

Silver, used in jewellery, photography and electronics, has risen 18 per cent since the start of this year.

Dealers pegged the upside target at $10.50 in the near term but said low liquidity in the market meant prices could easily move in either direction.

''I just think silver is getting a little more speculation than it normally would,'' said Darren Heathcote, head of trading at N M Rothschild in Sydney.

GOLD IN NARROW RANGE Gold, which failed to capitalise on silver's gains last week, traded in a range of $3 an ounce. But the metal was expected to gain in the long run.

The physical market lacked activity, with dealers struggling to attract buyers even though gold has dropped more than 3 per cent in value since spiking to a 25-year high above $574 an ounce in early February.

Spot gold touched $556.20 before easing to $554.90/555.80, compared with $554.10/555.00 late in New York.

''We see some positive factors that could potentially bring prices near the top of this range,'' said Yingxi Yu, analyst at Barclays Capital, referring to a trading band of $535-$575 in recent weeks.

''We have been turning quite negative on the dollar over the past week and we see some further downside potential for the dollar,'' she said.

The dollar recovered some poise against the euro on Monday after a string of losses, but its advance was capped by a growing view that the Federal Reserve would stop raising U.S. interest rates in the near future, dealers said.

A weak dollar makes gold cheaper for holders of other currencies.

Gold rose to its highest in 25 years at $574.60 on Feb. 2 as investors diversified into the precious metal on worries about rising oil prices, tension in the Middle East and uncertainty over the dollar's outlook.

In other precious metals, platinum rose to $1,037/1,041 an ounce from $1,032/1,036 in New York. Palladium eased to $314/319 an ounce from $315/320.

REUTERS SD VC1713