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TheStreet Open House

Gold and Silver Prices Claw Higher

NEW YORK ( TheStreet ) -- Gold and silver prices regained momentum Wednesday on strong physical buying as investors took advantage of recent selloffs.

Gold for June for delivery added $2 to settle at $1,455.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has climbed to $1,463.70 while the spot gold price was adding $2.90, according to Kitco's gold index.

Silver prices rose 17 cents to close at $40.23 an ounce.

Gold prices had fallen 1.3% this week as broad selling struck the commodities sector, but the metal was rebounding Wednesday as investors stepped in to buy gold on a "discount."

"Whenever we see a little selloff in the gold market, what's historically followed is some physical buying which has propped up the price," says Will Rhind, head of U.S. operations for ETF Securities. Rhind still thinks gold prices could hit $1,500 but that investors will have to be patient.

"I like the range between $1,400 - $1,450," says Mihir Dange, trader at Arbitrage, but that on the upper end gold could trade around $1,460 an ounce. "There seems to be a lot of strife around the world, inflation concerns and gold still can't seem to rally ... so right now I would trade a little neutral to bearish."

Dange doesn't think that $1,500 is off the table but that gold should have already broken that level on recent catalysts. According to the latest commitment of traders report, speculative longs in gold increased by 17,449, or 7.2%, from the last week in March to the first week in April, while short contracts grew 5,864, or 11%, pointing towards this more cautious trading outlook.

The U.S. dollar index was slightly lower Wednesday but then climbed higher after President Obama's budget speech outlined $4 trillion in cuts over 12 years. Gold kept rising tentatively after the Federal Reserve released its beige book report that indicated the economy was improving across the country but there were no game changers in the report for low interest rates. Gold will also look to Friday's inflation readings out of the U.S. and China for direction.

The Federal Reserve is expected to keep rates low but China could take more steps to tighten money supply, making Friday's inflation reading key to policy initiatives. The Chinese state run newspaper reported Wednesday that China will "earnestly implement its 'prudent' monetary policy" ranging from rate hikes to higher reserve requirements.

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