NEW YORK, May 26 (Reuters) - COMEX gold stretched its recovery early Wednesday, with strength in the euro and month-end position rollovers dominating floor activity, and weak U.S. durable goods orders giving it extra support.
Traders reconsidered expectations for an imminent dollar-supportive U.S. interest rate increase after the government said April orders for big-ticket manufactured items fell 2.9 percent, more than the 0.2 percent decline expected by economists.
June gold at 9:37 a.m. EDT was up $1.40 at $389.80 an ounce, trading from $387.70 to $392.10, its highest price since May 6.
"Gold popped up to the high when the number came out, as did the euro, and I'm sure it was a knee-jerk reaction to it," said a metals broker.
"The euro is probably breaking higher and that will probably lead gold back up," he said. "Gold already looks like it's trying to break out in turn."
The euro also rose to a 20-day high at $1.2143, making dollar-priced commodities more affordable in Europe.
The broker said the U.S. dollar index appeared to be breaking lower, which he predicted would be positive for precious and base metals. Like gold, the index hit its lowest since May 6 and a move below the May 5 low at 89.22 would be seen as confirming an end to a three-month uptrend.
Funds were busy with switches before June delivery notices start on Friday. But activity was muted before COMEX metals trade closes early that day. U.S. exchanges will be closed on Monday in observance of the Memorial Day holiday on Monday.
"It's just following the euro and you've got rollovers," a floor broker said of gold. "Outrights are here and there, but it's mostly the rolling over from June to the August contract right now."
Spot gold was quoted at $389.50/0.25, up from $388.10/8.85 late Tuesday. London bullion dealers fixed gold in the morning at $390.50.
Activity centered around the $390 strike price before options expired in London at 10:30 a.m. EDT (1430 GMT).
Chartists see gold prices poised to retest the $400 an ounce level. Gold has been trending higher since hitting a seven-month low at $371.30 on May 10.
With crude oil prices above $40 a barrel, traders are worried about the U.S. economic recovery and some think the Federal Reserve could delay an expected interest rate increase, despite voicing concerns about rising inflation.
This could be an ideal condition for gold, which looks better versus the dollar when U.S. deposits stay cheap and is also considered an inflation hedge.
July silver was up 3.0 cents at $6.115 an ounce, trading between $6.075 and $6.17, its highest since May 5.
Spot silver fetched $6.10/13, up from $6.07/10 late Tuesday. The fix was $6.11.
July platinum rose $3.70 to $838.30. Spot platinum fetched $835.00/840.00.
"In the last two days, as we did the slow creep to the upside, there was a little bit better public participation and a little bit better commercial participation," said Ralph D'Esposito at RJ Futures. "So we're trying to bring some volume back and some open interest back."
June palladium futures were off $3 at $250.25 an ounce. Spot fetched at $247.00/252.00.