NEW YORK, Oct 28 (Reuters) - COMEX gold prices gained in early New York action on Monday, defying all obvious fundamental reasons for a decline, and taking the opportunity instead to correct a technical price low and a rapid exit out of long gold positions in the last two weeks, traders said.
"We were kind of surprised by the early rise in the market, because the stock market was up, the dollar was up and yet, we saw a little bit of fund buying in there," said one broker.
"But, we reached that low (in December gold futures) on Thursday, and now we're trying to bounce back. So you could have some technical factors working in there," he added.
One broker added that trade may decide to jump in and buy gold before it climbs too far above recent lows.
Some chartists projected a possible rise to $316.10 an ounce for December gold in its technical turnaround on Monday.
December gold added $1.70 to $315.60 an ounce, and traded between $313.50 and $315.90, as it built on its recovery from Thursday's drop to a two-month low at $309.10.
One trader added that volume was light on Monday, but those who jumped into gold were "playing it from the long end."
In its Commitment of Traders report released after Friday's close, the CFTC said non-commercial traders held net long gold positions of 9,462 contracts at the Oct. 22 week, a sharp drop from 15,914 contracts in the prior week.
Furthermore, Pegasus' Tim Evans' weekly gold market comment said Thursday's break to a near-term low in gold may well have sent non-commercial players fully to the sidelines. He noted that the decline in net long positions is a steep decline from the Oct. 1 medium-term peak at 42,702 net long position.
"While it is possible the funds may now flow to the short side of the market, we see potential for at least a short-term flow back in on the long side, once the stock market finally allows a correction to develop and the dollar and bond markets also reverse course," Evans' report said.
U.S. equity markets turned mildly negative on Monday when some doubters sought light profits after a three-week winning streak. Major U.S. indexes started on the plus side on upbeat investment calls for financial services firm Citigroup Inc. and computer maker Hewlett-Packard Co. .
Meanwhile, the dollar stood its ground against both the yen and the euro on Monday as a German business survey confirmed that the euro zone's biggest economy remains weak. A strong dollar usually undermines gold prices as it makes the precious metal more expensive for European buyers.
Thursday's decline in December gold to the medium-term low violated the 200-day moving average. But, gold prices ended last week higher, setting up for an upward correction on Monday, said Evans.
He cited Fibonacci retracement levels at $316.80, $319.20, and at $321.60 an ounce as possible upside targets for December gold prices.
Spot gold was quoted at $314.45/4.95, up somewhat from Friday's close at $313.60/4.10. London dealers fixed Monday's early spot reference price at $313.30 an ounce.
December silver trailed gold's lead to trade 0.8 cent higher at $4.415 in a $4.40-$4.4435 range. Spot silver was at $4.41/43, slightly higher than $4.40/42 late Friday. Silver was fixed higher at $4.50.
NYMEX January platinum lost $0.30 to $586.50. Spot platinum was quoted $589/594 an ounce.
December palladium rose $2.60 to $314.0, up from Thursday's contract low at $309 an ounce. Spot palladium fetched $305/315 an ounce.