NEW YORK, Feb 24 (Reuters) - COMEX gold rose early Monday as the euro ticked up and dealers waited for Iraq's response to a demand from the United Nations to destroy dozens of banned missiles that would test Baghdad's willingness to disarm to avoid war.
"The overall trend is to believe the dollar will remain weaker," said a floor broker. "The euro is starting to work its way back up now and gold is following."
COMEX April gold at 1012 EST was up $3.80 at $355.50 an ounce, trading $350.40-$356.50. Futures broke above the highs late last week at $355 extending a recovery from seven-week lows Tuesday at $342.40.
The dollar fell back to $1.0755/56 per euro at midmorning from its overnight high at $1.0708. Because gold is seen as an alternative currency, it tends to move in the opposite direction of the greenback.
"We're seeing some light buying coming in here all around," said another COMEX source. "It stayed above a key area above $352.50/$353. As long as it stays above there, we're looking to go to maybe $356."
Spot gold was last quoted $354.45/5.20, up from Friday's close at $351.05/1.80. London bullion dealers fixed the Monday morning spot reference price at $352.90.
April gold hit a 6-1/2 year high early this month at $390.80, as the dollar fell to multiyear lows and investors sought safe havens in case the United States launches a war to rid Iraq of weapons of mass destruction and topple President Saddam Hussein.
The United States and Britain will introduce a new resolution in the U.N. Security Council Monday that could set the stage for war by declaring Iraq in violation of U.N. demands to give up chemical, biological and nuclear weapons.
But France, Russia and China are all opposed to a rush to war, preferring to give inspections more time. They can veto a resolution, which would leaving the United States on its own to to lead the war.
Iraq hinted Monday that it will comply with a U.N. order to destroy all its Al-Samoud missiles, engines and warheads after chief inspector Hans Blix gave Baghdad a deadline of March 1 because the weapons were found exceed the 150-km range limit set in 1991 after Iraq was defeated in the Gulf War.
"The Iraqi reaction being 'well we'll think about it' is of greater influence than any resolutions," said the first gold broker.
COMEX March silver was up 3.5 cents at $4.70 an ounce, in a $4.65-$4.71 range. Spot silver was at $4.70/72, up from $4.66/68 late Friday. It fixed at $4.675.
NYMEX April platinum was $5 higher at $664.00 an ounce. Spot was last priced at $672.00/677.00.
March palladium was up $1.50 at $252.00 an ounce while spot palladium last fetched $249.00/257.00.