US gold and silver futures rebounded early on Thursday on physical buying and short covering, as data showed that inflation pressures were stronger than expected.
Analysts, however, said that some investors could be on the sidelines as the market focused on the outcome of a Federal Reserve meeting and because of a lack of strong bounce following a sell-off earlier this week.
"We are seeing that physical buying has stepped up and the volume of selling has certainly eased off from what was seen earlier in the week," said Paul McLeod, vice president of precious metals at Commerzbank in New York.
At 10:24 am EDT (1424 GMT), most-active gold for August delivery on the COMEX division of the New York Mercantile Exchange was up $5.90 at $650.70 an ounce, dealing between $645.50 and $652.00.
McLeod said that reasons were plenty for investors to hold their bets because of the Federal Reserve's post-policy-setting meeting statement scheduled for later Thursday and the fact that Friday was the only trading day left in the second quarter.
Government data showed on Thursday that the US economy grew at a 0.7 percent annual pace in the first three months of this year, the weakest in more than four years but slightly better than previously estimated.
However, the report's inflation gauge, the Personal Consumption Expenditures price index, showed price pressures were stronger than expected.
Gold is usually seen as a hedge against inflation. COMEX September silver jumped 20.1 cents, or 1.6 percent, to $12.530 an ounce, dealing between $12.385 and $12.580.
September silver had tumbled as much as 7 percent this week before Thursday's rebound. "The support now was basically just a bounce back from yesterday," Jim Geeze at Rosko Futures said from the COMEX floor. Geeze said that silver futures could test the area below $12 an ounce in the near term and he pegged support at around $11.75 an ounce.
"I think there are certainly more downside risks existing in silver at the moment than in gold," McLeod said. Spot gold rose to $647.60/$648.20 an ounce, compared with $642.50/644.00 an ounce late Wednesday. The London afternoon gold fix was set at $647.25.
Spot silver was quoted at $12.42/12.46 an ounce, above the late Wednesday quote of $12.26/12.29. London silver was fixed at $12.425 an ounce.
NYMEX October platinum was up $5.20 at $1,289.00 an ounce. Spot platinum traded at $1,273.10/1,277.00 an ounce. September palladium gained $1.15 to $369.00 an ounce. Spot palladium fetched $364.45/368.45.