NEW YORK, Aug 29 (Reuters) - COMEX gold rose Thursday on the back of a weakening dollar and further confirmation that U.S. economic growth stalled in the second quarter, while U.S. saber-rattling against Iraq continued to unsettle investors.
The dollar slipped against the yen and euro, while on Wall Street, stocks gyrated mostly in negative territory after the Commerce Department in its first revision to second quarter Gross Domestic Product stuck with the 1.1 percent annual growth rate in its advance estimate last month.
"That brought some interest back to gold and from a technical perspective we recently traded down to the lower end of the range," said David Meger, analyst with Alaron Trading in Chicago. "It looks like it's doing nothing other than trading in that pennant formation of a range we've got going on."
COMEX December gold rose $3.50 to $314.40 an ounce, trading $310.80-$314.80. Estimated volume was a decent 31,000 contracts. Spot gold was at $312.90/3.40, up from Wednesday's close at $309.65/0.15 and London's late fix at $312.10.
A weak dollar makes gold more affordable for non-U.S. investors and cheaper for mining companies to continue unwinding forward sales. Dealers said there was still good support from producer buybacks.
The bounce erased the effects of a sharp fall late Wednesday. Market volatility was exacerbated by holiday trading conditions, with New York dealers preparing for a three-day weekend for Labor Day on Monday and London dealers having spent last Monday at home for a UK public holiday.
"We've got a long weekend coming up and I don't think anyone wants to be short," said a bullion dealer.
The seesawing Dow Jones industrial average was up fractionally in late trade. But the XAU index of gold and silver mining shares, recently a reliable leading indicator for daily gold price moves, surged 2.4 percent.
Wall Street forecasters were looking for GDP to be revised up to a 1.2 percent rate, still a huge slowdown from the 5.0 percent growth in the first quarter, when the economy showed clear signs of pulling out of 2001's contraction.
Meanwhile, rising unemployment claims were another signal that the recovery is not getting much traction.
Dealers said worries about the Bush Administration's policy on Iraq was a potential support, especially if higher oil prices choked off growth.
Vice President Dick Cheney reiterated Thursday that the risk of inaction was far greater than the risk of action to remove Saddam Hussein, whom the White House believes is trying to produce weapons of mass destruction that could threaten U.S. Arab allies and find their way into terrorists' hands.
"Unless the crude market goes through the roof, no one is really giving it much thought right now. It's in the back of everyone's mind," said a COMEX broker.
December silver is now the active contract and closed up 3.2 cents at $4.557 an ounce, trading $4.52-$4.585. Volume was 15,000, including last minute rollovers before delivery notices for September silver start Friday.
Spot silver was at $4.54/56, up from $4.50/52 late Wednesday. It fixed at $4.495.
On the NYMEX, palladium receded after a fund squeezed it to $380 early in the week. December palladium is now the active contract -- September notices start Tuesday -- and was off $4.40 at $340.60 an ounce.
Spot palladium was last quoted at $336/346.
October platinum rose $8.10 to $568.30, eyeing Wednesday's contract high at $578. Spot fetched $566/571.