Early COMEX gold rebounds as OTC options expire

NEW YORK, Oct 29 (Reuters) - COMEX gold churned back into the black in options-linked trade early Wednesday, getting help from a softer dollar while mulling the implications of the Federal Reserve's continued easy stand on interest rates.

The market was beset by last-minute position adjustments in London, where dealers had to declare their intention to take delivery against over-the-counter options by 0930 EST/1430 GMT.

"We've got options expiration today so it's bouncing around. There seems to some interest at $380 and $385," said a gold trader.

At 0936 EDT, December gold was $2.20 higher at $385.60 an ounce, trading between $386.10 and $380.30.

Spot gold rose to $385.75/6.50 by midmorning from $382.50/3.25 at the close. London bullion dealers fixed the morning reference price at $382.70.

After the COMEX close Tuesday, the Fed said it would leave short-term interest rates at 45-year lows to ensure that the economy continues to recover and the rate of inflation does not drop too low.

The super cheap deposit rates have contributed to the dollar's decline this year and helped zero-yield gold rise to 7-year highs in September. December gold came within $2 of that $394.80 high on Friday after a $23 rally last week.

Low rates have eliminated the contango that producers and speculators used to be able to earn by selling gold short in forward markets. But the bond market has already pushed up yields as worries about an inflation pick-up flourish.

The dealer said the turnaround in the economy has got to be negative for gold in longer term.

"If anything, higher interest rates are bad for gold because it brings back hedging," he said. "There was so much (producer) buying in the last several quarters that if all of a sudden it ended, these funds may turn on the market, their safety net being gone."

The euro moved up to $1.1691/96 from $1.1664/70 Tuesday afternoon. That brought funds in buying on the COMEX, keeping gold above the psychological $380 level.

"We're moving with the euro -- the euro just ran up and so did we," said a floor broker.

December silver was up 6.8 cents at $5.165 an ounce after tumbling 9.5 cents Tuesday. It touched $5.165 and $5.07.

Spot silver was last quoted at $5.15/17, up from $5.08/10. The fix was $5.15 an ounce.

NYMEX January platinum was $6.60 higher at $754.50 an ounce. Spot platinum fetched $751.00/756.00. It hit another 23-year high as the dollar's weakness against the yen promoted Japanese buying, while a strong rand affected production out of South Africa.

December palladium was $6.30 higher at $206.00 an ounce. Spot palladium fetched $199.00/206.00.