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Silver, Gold Prices Settle Off Highs

NEW YORK ( TheStreet ) -- Gold and silver prices had a bumpy ride Monday as profit taking and a recovering U.S. dollar capped recent highs.

Gold for June delivery added $5.30 to settle at $1,509.10 an ounce at the Comex division of the New York Mercantile Exchange. Gold was backing off from its recent record of $1,519.20. Physical buying rose slightly with the spot gold price adding $6, according to Kitco's gold index.

Silver prices had been close to conquering their record high of $50 an ounce Monday, adding more than $3 to $49.82 an ounce. This 6% plus daily move for silver was sizable, and silver couldn't hold it. The metal settled up $1.09 to $47.14 an ounce.

Silver has been particularly volatile Monday. As the metal approached $50, buy orders were triggered where traders automatically bought silver at a pre-determined price, but the steep move also ignited profit taking. Also adding to silver's volatility were those traders betting against the metal's recent rally.

Because precious metals can see corrections of 10%, which would bring silver back to the $43 level, many traders and analysts have been calling for a selloff. The assumption of a selloff has led traders to short the metal who had been forced to forfeit those positions and buy silver at much higher prices. The shorts got lucky with today's intra-day selloff but the bulls led silver to the close.

Scott Redler, chief strategic officer at started shorting silver last week, "I am still net short and I [was] getting hurt into this parabolic move ... do not get excited and buy into silver."

Redler trades the iShares Silver Trust (SLV) which added 106 tons last week as investor demand ballooned, and added to his short position at the open.

Silver could also be experiencing a knee-jerk reaction as the metal almost touched $50. "The first time around is always great to get short because you can stop yourself out," says Mihir Dange, trader at Arbitrage. "I am looking for a pullback before silver attempts to make another high." A similar pattern could emerge if silver makes a run for a new record.

Although technical trading was playing a big factor Monday, a weaker U.S. dollar has been the most recent catalyst. The U.S dollar index was 0.14% lower at $74, recovering from a deeper selloff earlier this morning which has added to volatility in the metals.

The dollar has been suffering recently as investors worry the U.S. government won't be able to control rising debt and that the currency will continue to lose value.
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