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.

James Moore, research analyst at FastMarkets, acknowledges that the metals could use some consolidation but wrote that "further scaled down investment and physical buying interest should help underpin both."

A stronger U.S. dollar had been pressuring gold and silver but a reversal is now supporting prices. The U.S. dollar was losing 0.07% versus the euro, as the two currencies stay locked in a volatile tango. The euro had been struggling after state elections in Germany left the future of Chancellor Angela Merkel in doubt. Merkel's Christian Democratic Union party lost key support in Baden-Wuerttemberg for the first time in 58 years.

Germany is the strongest country in the Eurozone and has been credited, with France, of propping up weaker nations and keeping the euro alive. The amount of money Germany has poured into helping bailed out countries like Ireland, Greece and possibly Portugal has not been universally popular and Merkel's cloudy future is spilling over into the euro.

Portugal was hit with more bad news today with Standard & Poor's downgrading 5 of the country's banks. Long-term borrowing costs for the country rose to 7.955% on Friday.

Gold mining stocks, a risky but profitable way to buy gold, were struggling to head higher. Yamana Gold ( AUY) was 0.49% lower at $12.26 while Harmony Gold ( HMY) was adding 1.77% to $14.35.

Other gold stocks, New Gold ( NGD) and Gold Fields ( GFI) were trading at $11.27 and $16.79, respectively.


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-- Written by Alix Steel in New York.

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