NEW YORK, Sept 22 (Reuters) - COMEX gold prices surged Monday morning to play catch-up with the higher levels established overnight, when traders interpreted a Group of Seven call for flexible exchange rates as a concerted effort to weaken the dollar, gold dealers said.
"It's all currency related. There's nothing new for this latest spurt. We rallied on the news overnight. And even though we (gold) opened higher, it got sluggish right after that," said on COMEX floor broker.
The so-called G7 industrialized nations issued a weekend communique from their summit in Dubai, that stressed exchange rate flexibility. Analysts read the statement as a green light to sell dollar/yen, and as criticism of Japan's aggressive intervention to keep its currency weak to benefit its exports.
While December gold eased off the overnight highs to trade up $3.90 at $386.8 an ounce, it clearly established its range at a new plateau between $384 to $389.10 on Monday.
Traders said they expect $389 to serve as first resistance level for gold, then $391, the high from March 1996.
After COMEX gold's open, the dollar added to losses against the euro and yen. Weakness in the U.S. currency improves dollar-denominated gold's value in overseas markets.
In addition to the weekend currency news, finance officials at the International Monetary Fund meeting in Dubai had said that while no new gold pact would be set at the weekend, preliminaries were discussed on the sidelines.
Gold headed toward its 7-month high after initial brief IMF talks on renewal of a central bank gold sale pact, that expires next year, were held at the weekend.
While Dutch Central Bank governor Nout Wellink told Reuters on Sunday that a new deal would be covered properly next year, expectations arose among gold dealers that Europe's Cental Banks would renew the pact to limit gold sales from their vaults for another five years.
Central banks worldwide hold more than 32,000 tonnes of gold, enough to feed world demand for about 12 years. The expiring pact limits gold sales by 15 central banks to 400 tonnes a year until September 2004.
Spot bullion was last quoted at $384.20/4.70 an ounce, up from $381.60/2.30 late Friday. London bullion dealers fixed the spot reference price at $385.50.
Silver prices surged in response to the soaring gold prices, then a rapid round of profit taking knocked it lower.
December silver was down 2.2 cents at $5.27 an ounce, trading $5.27 to $5.37. COMEX silver rose to a 3-year high at $5.38 on Sept 12.
Spot silver slipped to $5.22/5.24 on Monday from $5.24/26 on Friday. The fix was $5.31.
NYMEX October platinum rose $4.70 to $701.00 an ounce. Spot was last indicated at $703.00/708.00.
December palladium eased $0.25 to $222.50 an ounce. Spot palladium was unchanged at $215.50/221.50.