NEW YORK, July 29 (Reuters) - COMEX gold prices sold off in a bout of profit taking on Monday despite unexpectedly weak confidence data, a weak dollar and weak share prices, but traders said they thought the limited losses at the close was a positive sign as gold held the parameters of its higher range.
"I think to say it was profit-taking is pretty accurate. It had a pretty good rally, close to $30. I think a little bit of profit-taking definitely did come in," a trader said.
As to what sparked the selling in a set up that in most cases would seem ideal for a gold rally, traders said was probably due to an overly long market.
"They expected gold would react positively to confidence date and they would take profits. But there was no buying on the other side. They sold and the market couldn't handle it. They were all on the same side of the boat," said one dealer.
He said the unusual buying on Monday was all fund driven on fundamentals that warranted a sell off, so when the tables had turned on Tuesday the funds already held heavy long positions.
August gold futures on the New York Mercantile Exchange's COMEX division finished $3.20 lower at $361.70 an ounce, after surging a day earlier to its highest level since June 6. Tuesday's range ran between $360.90 and $365.40.
Some of the decline in August futures was chalked off to rollover business as December will soon become the benchmark contract. Wednesday will be the last trading day for August gold. December futures fell $3.10 to close at $363.60.
COMEX gold volume was seen at 75,000 lots by the end. Nearly 10,000 of those were switches. Gold volume was a huge 101,040 lots on Monday. Open intrest was up 4,563 at 230,872.
Traders noted that the new higher range is still in tact between $356 and $368 in spot gold.
While the dollar regained some ground in the afternoon it had lost earlier against the euro, and one gold dealer noted that the euro has held its higher range just like gold has.
"The euro hasn't broken out of its $1.1400-$1.1550 in a week and a half and it's logical that gold wouldn't break its range either. It stopped where it should have and now we're in the middle of the current range," a gold dealer said.
The euro changed hands at $1.1442/46 late Tuesday.
U.S. consumer confidence suffered a sharp and unexpected decline in July as worries over rising unemployment took a heavy toll, according to the Conference Board's gauge.
Spot gold at $360.75/1.45 an ounce was much lower than $364.90/5.40 late Monday. London dealers fixed the afternoon spot reference price at $363.50.
Silver prices came off fairly sharply as well and traders pointed to the precarious peak put in on Monday as reason for Tuesday's selling. On Monday, spot silver surged to its highest level since late February 2000.
COMEX September silver dropped 3.00 cents to $5.165 an ounce. Tuesday's range was $5.035 to $5.18 range. On Monday, September silver hit an all-time contract high at $5.23.00.
COMEX estimated about 21,000 silver contracts traded by the close, compared with 23,867 lots on Monday.
Spot silver was quoted only lower at $5.14/5.16 than $5.18/5.20 an ounce late Monday. Silver was fixed at $5.02.
October platinum futures rose $1.60 to close at $698.00 an ounce. Spot platinum was quoted higher at $695.00/700.00 an ounce.
September palladium ended $4.85 higher at $178.35 an ounce. Spot palladium moved up to $176.00/182.00.