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COMEX gold bounces as oil prices surge to $30/bbl

NEW YORK, Aug 20 (Reuters) - COMEX gold regained its footing Tuesday, rescued from Monday's downdraft by profit taking and market concern about surging oil prices, while players weighed whether the 2002 gold boom was petering out.

"In gold, you're getting a little rally coming back from oversold conditions, nothing more than that," said a COMEX broker. "No big buyers, just some profit taking" by traders who bought back previously sold gold at a profit, he said.

December gold rose $2.70 to settle at $310.40 an ounce. It traded up from $307.70 to $311.20, paring a $7.70 loss on the back of Monday's 212 point rally in the Dow Jones industrial stock average to its highest since early July.

Estimated turnover was 32,000 contracts.

Dealers predicted the contract would settle into a lower range, capped at $311-$312 with $305 as the initial downside limit. The contract touched $306 Monday.

Spot gold was last quoted $308.75/25, up from Monday's close at $306.30/80. London bullion dealers fixed the price of gold at $308 an ounce Tuesday afternoon.

Investors tiptoed back into gold as financial markets came down with more jitters. The Dow was 135 points lower Tuesday afternoon, and the dollar was softer after rising to a one-week high earlier in the day.

Crude oil prices punched above $30 a barrel in New York, their highest in a year and a half, among the only worrisome inflation indicators in recent months.

"They kind of de-linked the inflation/oil/gold thing," said a bullion dealer. "But maybe it's coming back again today."

In early June, spot gold hit its highest interbank price since October 1999, probing above $330 an ounce with financial markets unnerved by talk of a double dip recession, corporate scandals and the threats of a United States military attack against Iraq while Washington conducts a war on terror.

Dollar deposit rates at 40-year lows also made it expensive for producers and speculators to fund forward gold sales.

Demand from India, the world's largest consumer of physical gold, helped shore prices up around $304/305 overnight.

India is entering its festival season of peak demand. But dealers said a weak monsoon was likely to severely crimp rural incomes and slash gold demand from traditional buyers of gold ornaments and trinkets from last year's level.

"Fundamentally it doesn't look great," said the dealer. "On an annualized basis it might be something like 300 tonnes of lost demand. The market doesn't need that."

"Anyway, we had a small bounce today, but it's just lack of follow-through, I guess," he said.

Some players are worried about a break below $300.30, gold's Aug 1 low as commodity fund liquidation dovetailed with a recovery in major stock indices from five-year lows.

The 476-contract net noncommercial short on the COMEX last week was the first fund short since early 2002, and showed the decks were clear for more buying. It also showed the optimistic mood that sent gold prices up 17 percent in 2002 was waning.

"At the end of the day gold is still caught in this $300-$320 trading range," said Ian MacDonald, head of bullion dealing at Commerzbank.

"It looks like volatile times with what's going on in the world -- geopolitical uncertainty ain't over," he continued, adding that direction should be clearer after vacationing players filter back to work after the U.S. Labor Day holiday.

September silver rose 3.2 cents to $4.437 an ounce, retracing Monday's 8.8 cent swoon. The range was $4.405-$4.465. Spot silver was quoted at $4.43/45, up from $4.41/43 late Monday. Tuesday's fix was $4.435.

NYMEX October platinum fell $6.10 to $546.70 an ounce. Spot platinum was at $545/550.

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