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Gold Gains as Traders Cover Shorts (Update 2)

Updated from 2:23 p.m. ET with added comment and miner closing prices

NEW YORK ( TheStreet) -- Gold prices on Wednesday rebounded as traders covered short positions amid concerns that Syria's civil war could expand through the Middle East and as the dollar weakened.

Gold for June delivery at the COMEX division of the CME rose $24.90 to $1,473.70 an ounce. The gold price traded as high as $1,475.80 and as low as $1,446.70 an ounce, while the spot price was charging higher by $21.60, according to Kitco's gold index.

"This is just retracement of what happened yesterday," said David Williams, director of Strategic Gold Corp.

Silver prices for July delivery were slipping 5 cents to $23.76 an ounce, while the U.S. dollar index was dropping 0.43% to $81.93.

"It also suggests that traders are very wary of aggressive positions," Peter Hug, global trading director at Kitco Metals, wrote in a note. "General consensus around the big desks is still on the bearish side (short term), but the Middle East, physical off-take and a generally weaker U.S. dollar overnight contributed to the short-covering."

China continued large purchases of physical gold from Hong Kong. The country imported some 223.519 tons in March, which jumped from some 97.106 tons in February.

The data supported other reports that physical demand has propped up prices of the yellow metal in paper markets, but Strategic Gold Corp.'s Williams said the news that China purchased a large amount of gold from Hong Kong likely isn't driving the price move on Wednesday because those purchases have already happened.

Since gold's collapse last month, there has been a clear disconnect between the paper market that is still off about $90 from its April 11 COMEX settlement price, and the physical market that is seeing large demand from China, India, retail purchasers and central banks, according to author Nick Barisheff of "$10,000 Gold."

A Bloomberg report, citing sources familiar with the matter, said billionaire John Paulson's Gold Fund lost 27% in April largely affected by the precious metal's two-day collapse that month.

Gold mining stocks closed mostly higher on Wednesday. Shares of Barrick Gold (ABX - Get Report) climbed 8.5%, while shares of Eldorado Gold (EGO) finished up 6.4%.

Among volume leaders, Kinross Gold (KGC - Get Report) increased 6.1%.

Gold ETF SPDR Gold Trust (GLD) gained 1.5% to $142.45, while iShares Gold Trust (IAU) added 1.5% to $14.31.

Outflows of funds from SPDR Gold Trust have continued to batter the ETF as it has lost about 12.5% year to date. Gold futures have traded at a 3.1% premium to the massive gold ETF.

"We find that the discount was a result of a timing difference in when the NAV and the price of the fund are calculated," financial research firm CreditSights, said in a note.

-- Written by Joe Deaux in New York.

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