NEW YORK—A midmorning reversal in the dollar helped gold to settle above $1,500, while silver trimmed earlier losses.
The precious metals recovered through the afternoon as traders who bet on lower prices rushed to cancel those bets by purchasing futures contracts.
The gold contract for May delivery rose $5.50, or 0.4%, to settle at $1,506.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
The silver contract for May slipped 71.6 cents, or 2%, to settle at $34.7930 a troy ounce, after touching an intraday low of $32.595.
Investors holding foreign currencies were lured back to precious metals by the weaker dollar, which makes dollar-denominated futures appear cheaper relative to other currencies.
"The reversal in the dollar gave commodities a boost, but it's a mix of short covering and a little bit of bargain hunting," said Matt Zeman, head of trading at Kingsview Financial.
Earlier in the day, gold futures remained under pressure from the previous day's declines. A larger-than-expected increase in gasoline inventories set off a wave of selling Wednesday, as traders shed baskets of different assets scrambled to avoid further losses.
"When you have a portfolio of commodities and you've seen energy, silver and grains move against you, you have to unwind positions to meet your margin obligations," said Rob Kurzatkowski, senior commodity analyst at optionsXpress.
The losses mounted overnight, with gold trading below $1,500 as the safe-haven metal got caught in the sector-wide volatility.
"The asset allocations are still looking at gold, but they're a little bit more reserved and a little bit cautious right now because the market has become extremely exaggerated," said Scott Meyers, senior trading analyst at Pioneer Futures. "Gold, relative to silver, is stable. It hasn't lost that underlying safe-haven feeling."
Silver prices plummeted 27% from a peak of nearly $50 last week as a series of collateral requirement hikes by Nymex-owner CME Group Inc. forced undercapitalized traders out of the market. Speculators in the benchmark 5,000-ounce silver contract must now put up $21,600 per contract to open a position, and maintain $16,000 of that to keep the contract overnight.
"Retail traders used to act as a buffer, but they've been shaken out of the market and we're seeing them move into the silver exchange-traded funds rather than the futures market because they've been priced out," said Mr. Kurzatkowski.
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