NEW YORK ( TheStreet ) -- Gold prices shot up while silver prices popped Thursday as investors bought the metals against a weak dollar and higher inflation expectations.

Gold for June delivery settled $14.10 higher at $1,531.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price soared to a record intra-day level of $1,538.80 an ounce while the spot gold price was less aggressive rising $6.90, according to Kitco's gold index.

Silver prices for July moved $1.55 higher to settle at $47.54 an ounce.

Thursday's rally carried over from Wednesday, when gold and silver popped 1% and 2%, respectively and rose even higher in after-hours trading. Federal Reserve chairman, Ben Bernanke, can be thanked for the rally. The unanimous decision by the Fed to keep interest rates at 0-0.25% until at least the fall as well as keeping its balance sheet the same size after quantitative easing ends in June meant more cheap money for longer.

The Fed will reinvest its profits from its current $600 billion bond buying program back into the market not adding extra cash but not taking any away either. Inflation forecasts were also below the Fed's 2% target, which means the central bank would want more inflation. Some experts are calling this QE 2.5 and say that this leaves the door open to a third round of quantitative easing, or QE3.

"Last time gold and silver were making headlines like this, the Volcker Fed actively moved to block speculation in gold and silver futures, hiking interest rates to double-digits to kill the 'inflationary psychology,'" said Adrian Ash, head of research at BullionVault.com. "Whereas yesterday, and keeping rates at zero, the Fed hiked its 2011 upper-inflation forecast to 2.8%, but today's GDP data already put domestic price rises up at 3.4% annualized."

This is "adding quite a bit of pressure to the dollar index and investors are going to be searching for those hard assets to protect themselves," says Phil Streible, senior market strategist at Lind-Waldock. " I am looking at the long side of both gold and silver." Streible would be buying if gold sunk to $1,505-$1,510 level and if silver breaks south of $46.

Those levels look hard to reach with the metals taking off after the Labor Department said people filing for unemployment claims last week rose more than expected. The Fed has said it wants the unemployment rate to fall to 8%, currently at 8.8%, which will be hard to do the more jobless claims rise.

Streible says the rally is even stronger because speculators who were washed out in the recent selloff could get back into the market as well as those who missed the rally the first time. His forecast for 2011 is $1,650 for gold and $60 for silver.

It's not just the U.S. pushing gold and silver higher. The Bank of Japan left interest rates unchanged at its latest central bank policy meeting and lowered growth forecasts estimating a recession. On the flip side, the IMF has said that Asia needs to tighten more and faster to fight rising inflation. This balancing act escalates the likelihood of negative real interest rates, at least for the medium-term.

"The prospect of low interest rates and higher inflation expectations in the U.S., coupled with ongoing issues such as increasing Eurozone debt concern and Middle East-North Africa unrest continue to create a bullish environment for bullion as investors look to hedge against negative real-interest rates and rising inflation," says James Moore, research analyst at FastMarkets.com.

The recent rally doesn't make gold and silver any less crowded, however, meaning that there are a lot more people in the market who could sell or take profits, especially in silver.

Monday on the Comex, trading of silver futures popped to a record 319,204 contracts. Adding to potential volatility is the end of April, where traders must either roll over their existing contracts or let them expire. This could also account for the price discrepancy between the futures market and spot (physical) market.

In the latest commitment of traders report for the week ending April 19th, gold speculative longs rose 5%, while short contracts were down 0.5%. Silver, however, was a different story, with long positions up 4.3% and shorts up 7%, pointing to fiercer rallies in silver but also more volatility.

Gold mining stocks, a risky but potentially profitable way to buy gold, were largely flat Thursday. Kinross Gold ( KGC - Get Report) was losing 0.06% to $15.66.

Goldcorp ( GG) was losing 0.05% to $55.05 while Agnico-Eagle ( AEM - Get Report) and Eldorado Gold ( EGO - Get Report) were trading at $67.76 and $17.92, respectively.


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-- Written by Alix Steel in New York.

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