NEW YORK, Sept 26 (Reuters) - Both COMEX gold and silver markets, in hugely overbought situations, finished with substantial losses again on Friday, although selling in both markets stopped above key support levels and set the stage to renew their ascent next week, traders said.
In a technical rout that began late Thursday, traders said, both gold and silver markets were overdue for price corrections. Once the trigger came from a dollar strengthened by unexpected improvement in the U.S. GDP report, heavily laden gold holders took the opportunity to unload and take profits.
"Definitely, both markets were way way overdone, due for a technical correction. You got a decent size correction in both," said one precious metals trader.
"Today's performance is due to yesterday's price action, a knock on effect from yesterday's rejection of those higher levels," said another New York gold dealer.
COMEX December gold futures added to losses by the end to finish $4.10 lower at $381.80 an ounce. The range extended down to $380.10 from a high at $387.50 an ounce.
COMEX estimated gold volume at 52,000 lots at Friday's close, compared with 78,776 lots on Thursday. Open interest rose by 1,460 on Thursday to 296,135 lots.
Noting that the current consolidation range is a wide one, one dealer said he thought gold could encounter more selling as it consolidates its recent gains and losses. If December gold drops below $380, look for $372 to $369, he said.
Some players said they thought gold could try to retackle resistance levels, but added that quarter-end book squaring could set the stage for more volatilility in the next few sessions.
On Thursday, speculative and fund buying sent December gold to a new contract high at $394.80 an ounce, a peak last seen in April 1996 when gold futures reached $398.
Traders said $398 was now key resistance for COMEX gold on the way to the psychological objective at $400. One broker noted that gold had trouble at $398 in 1996 and again in 1991.
The selling spree begun on Thursday accelerated on Friday when the dollar rose about half a cent to session highs on the euro following stronger-than-expected U.S. growth results.
A strong dollar undermines gold's value overseas.
"Yes, the dollar did strengthen. But this is a gold move," a dealer said of Thursday and Friday's technical sorting out.
Spot gold bullion eased to $380.60/1.10 from its 7-year peak at $393.30 hit on Thursday and down from $384.20/4.90 late Thursday. The afternoon reference price was $382.70.
COMEX December silver also got slammed when funds and speculators continued to take profits. One broker described a large speculator as "so long he couldn't breathe anymore."
When funds sold, "it opened the gates for locals and commission houses to get more aggressive and sell too," he said.
December silver lost 7.70 cents by the end at $5.1450 an ounce, in a $5.1350 to $5.2450 range. Spot silver slid to $5.10/5.12, well off the late Thursday quote of $5.18/5.20. Silver was fixed at $5.19.
PGMs were also overextended to the upside. One broker said it was time they "got spanked," to correct their swift rise too.
NYMEX October platinum dropped $18.40 to close at $697.40 an ounce, after sliding as low as $688. Spot platinum slipped to $703/708, down from $715/719 late Thursday.
December palladium fell $6.55 to settle at $211.55 an ounce. Spot pulled off the lows to $208.50/214.50.