NEW YORK ( TheStreet ) -- Gold prices settled just under $1,500 an ounce Wednesday and silver conquered another 31-year high as the U.S. dollar sank.

Gold for June delivery added $3.80 to settle at $1,498.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,506.50 and as low as $1,493.80 during Wednesday's session, while the spot gold price was adding $3.40, according to Kitco's gold index.

Silver prices jumped 54 cents to close at $44.46 an ounce after breaking the $45 level.

Gold has surpassed many analyst expectations for 2011, with Brian Hicks, co-manager of the U.S. Global Investors Global Resources Fund, increasing his price target to $2,000 in 18 months and silver to $100.

"I think it's clear that we are in a bull market," says Hicks. "Gold and silver still have not surpassed their inflation adjusted highs like so many of the other commodities have. Gold and silver are still extremely small markets."

As gold and silver catch on as must-have investments, prices will rise, according to Nick Barisheff, CEO of Bullion Management Group."I think we are starting to move into a phase where we are getting institutional involvement." Barisheff points to the fact that the University of Texas Investment Management, one of the largest pension funds, is taking delivery of 6,643 gold bars.

In 2009, "we had central banks starting to buy," says Barisheff, "and once you have institutions ... coming around to the conclusion that they need to add a meaningful percentage" prices will go higher.

Barisheff says there is only $6 trillion in above-ground supply of gold, with $3 trillion of it being bullion. Out of the $3 trillion, half is in central bank vaults and the other half is in private hands. Financial assets are worth $200 trillion, not counting derivatives and real estate, so any movement out of the $200 trillion and into the $1.5 trillion would be huge. "The only thing that can adjust is the price."

"At a minimum, the quickening shift to physically allocated gold proves the long-term intent of the institutions involved," argues Adrian Ash, head of research at, " David Einhorn's Greenlight Capital made the move two years ago. It's since saved his clients at least $3.2 million in fees."

Nevertheless, record high prices are making some traders jittery. Scott Redler, chief strategic officer at, is taking profits in some of his gold position and David Banister, chief investment strategist at says "I would probably be looking to trim some of my positions."

Banister believes gold could rally to between $1,525 and $1,550 before seeing a meaningful correction to the $1,300 level. Banister, however, does think that gold could still hit $1,750 to $2,000 in the next few years.

On the other hand, Will Rhind, head of U.S. operations for ETF Securities, has not seen any profit taking or price sensitivity from gold buyers but is noticing more diversification. "What we are noticing is a very clear trend that people are starting to diversify exposure through the baskets such as ETFS Physical PM Basket ( GLTR) and ETFS Physical WM Basket ( WITE).

GLTR is a mix of gold, silver, platinum and palladium, although gold is the dominant metal, whereas WITE is purely silver, platinum and palladium. "We're certainly seeing less single metal plays .... You've got to be quite a conviction player to purchase gold at these levels."

Silver has rallied 45% since the beginning of the year and many traders are pleading for a pullback.

Mihir Dange, trader at Arbitrage, says the "relative strength show both commodities well overbought ... a pullback is overdue. Its still a bull market and a pullback would be quite healthy at this point."

Anthony Neglia, President of Tower Trading, thinks there could be a pullback to $43 "but I don't reverse my opinion. It doesn't change till we trade below $41." Neglia argues silver will hit $50 before $40 again.

Despite an increase in risk appetite and a triple-digit rally in stocks, gold and silver are still benefiting from safe-haven bids with the culprit being a weak U.S. dollar. The U.S. dollar index was falling 0.84% to $74.43 as the greenback has had a tough time recovering from Monday's S&P downgrade of the U.S. economy. The dollar will be taking its cue from Washington as to whether Congress can pass a meaningful 2012 budget and get its fiscal house in order.

The fragility of currencies have been on display in Asia as well with emerging markets reportedly buying dollars to help suppress the rapid rise of local currencies. This comes as China is taking steps rejigger the dollar as the world reserve currency. China is trying to make it easier to bring the yuan back into the country and to do business in the currency without converting it into dollars.

China is the largest holder of U.S. debt, along with the Federal Reserve, and doesn't want the currency to tank on the international stage, but has been taking steps to beef up the its own global presence.

Gold typically reacts well when currency fluctuations are in the spotlight as it underscores gold's stability as safe money.

Gold mining stocks, a risky but potentially lucrative way to buy gold, were climbing. Kinross Gold ( KGC) was adding 0.98% to $15.39 while Goldcorp ( GG) was up 0.64% at $55.02.

Other gold stocks, Agnico-Eagle ( AEM) and Eldorado Gold ( EGO) were trading at $67.52 and $18.15, respectively.

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-- Written by Alix Steel in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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