Newswire

COMEX gold soft in early range before UK long weekend

NEW YORK, Aug 23 (Reuters) - COMEX gold was delving the bottom of the week's range early Friday, capped by firmness in the dollar and equity markets but restrained on both sides before the holiday long weekend for London bullion traders.

December gold at 0912 EDT was off $1.50 at $306.80 an ounce, holding in a $308.70-$306.30 range above Monday's low at $306.

Spot gold was quoted at $305.40/90, off from the close at $306.95/7.45. The early fix in London was $305.80.

"The strength of the dollar, the perplexing concurrent strength of the equities market, and very thin trading conditions due to cyclical considerations have conspired to keep the gold and silver markets on the defensive," wrote Leonard Kaplan, president of Prospector Asset Management, in his daily client note.

"On the positive side of the ledger, we are beginning to see the reawakening of Indian demand," continued Kaplan.

Gold is still up 11 percent on the year, and physical demand offers protection above the Aug 1 low at $300.30, basis December. But it has fallen sharply from the 2-1/2 year highs above $330 in early June, struck when the stock market was plumbing five-year lows and the dollar was challenging the 1:1 level with the euro.

The Dow Jones industrials rose 96 points to end above the 9,000 mark on Thursday for the first time in six weeks. The dollar, meanwhile, has strengthened back to around 97 cents per euro.

A steadier dollar undermines the bullion purchasing power of overseas investors while bouncing equities limit the need for gold as safe-haven portfolio insurance.

The $305 area looks like a base, but in illiquid summer markets could easily break, dealers said.

"There are no magic numbers and if there are I am not sharing them anyway," confided a bullion bank dealer. "I have my magic number, but I'm not interested in broadcasting it."

The festival season is getting under way in India, the world's largest bullion consumer. This is the one of the times of year when demand for gold peaks. But a weak monsoon this year has hurt incomes in many rural areas, which buy most of the gold for jewelry and religious objects.

Worries about U.S. saber rattling against Iraq has investors jittery about wealth preservation in case of a U.S. war in the Middle East, which could favor gold.

Likewise, higher oil prices are also adding some support on the margins, although there is little worry at the moment about an inflation spike.

With crude touching 18-month highs this week over $30 a barrel, markets are more nervous about the shaky economic recovery.

September silver was off 3.5 cents at $4.43 an ounce, trading $4.48-$4.42 after a week of volatile moves which included setting a six-month low on Thursday before ending with a 4.5-cent gain.

Spot silver was quoted $4.42/44, down from $4.46/48 late Thursday. Friday's fix was $4.44.

NYMEX October platinum was off $1.90 at $543 an ounce. Spot platinum was at $541/549.

September palladium was up $1.50 at $322 an ounce. Spot last fetched $318/330.