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Gold, Silver Prices Volatile on Profit Taking

NEW YORK ( TheStreet ) -- Gold and silver prices were volatile as investors weighed recent highs in the precious metals and looked to lock in profits ahead of the second quarter.

Gold for April delivery lost $6.30 to close at $1,419.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,430 and as low as $1,410.10 while the spot gold price was dropping more than $10, according to Kitco's gold index.

Silver prices eked out a 3 cent gain to $37.08 an ounce. Both metals. however, bounced back from session lows as buyers stepped in enticed by lower prices.

Explanations for today's selloff have run the gamut. Headline news like hawkish comments from Federal Reserve members to worries that there will be no third round of quantitative easing to improving economic growth in the U.S. were the favorites. But most traders weren't surprised by the move down.

"I've been calling for this $1,400 support and $1,450 congestion area," says George Gero, senior vice president at RBC Capital Markets. "Gold and silver somewhat on the defensive as asset allocators see stocks highest this year since Feb 18th."

Gold has tried 5 times now to break and hold record highs. Gold now has to overcome an intraday high of $1,448.60 an ounce.

"I see ... that silver has been outperforming gold," argues Gero, "and I think silver is outperforming gold because it is a bridge between investment demand and industrial demand." Gero also says that gold is less speculative and that silver is where investors and traders are trying to hedge their currency positions.

Year -to-date, silver has rallied 20% while gold is relatively flat despite hitting new records. Although both metals had been down at one point 1% Monday -- 0.70% for gold and 1% for silver -- on average silver outperforms gold by 0.5% to the upside and downside. The ratio between the two metals is 38, meaning it takes 38 ounces of silver to buy 1 ounce of gold. The lower the ratio the higher the silver price.

There are some technical explanations for silver and gold's selloff. Gold rallied 2.6% in March, factoring in its intraday high, while silver was up 14%, factoring in its intraday 31-year high of $38.18 an ounce. As global uncertainties persist from Japan to the Middle East/North African region to the Eurozone, taking profits where one can might be a popular option. Also, the first quarter ends Thursday, so portfolio managers might also be under pressure to show gains.
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