NEW YORK, Sept 24 (Reuters) - COMEX gold launched a late rally on Wednesday to extend the day's range as dollar weakness, a stock market selloff and a surprise oil output cut by OPEC all conspired to shove yellow metal prices out of their consolidation doldrums, traders said.
"Some people still think of gold as a hedge against inflation and higher oil prices equals inflation, so people tend to buy gold on that news," said one gold dealer.
COMEX December gold futures finished with a $1.40 gain at $388.40 an ounce, just below the day's high of $388.50. The session low was $385.70.
Contracts out to December 2005 finished from 30 cents to $1.60 higher, while June 2006 futures and beyond ended 20 cents to $2.30 lower.
COMEX estimated final gold volume at 38,000 lots down from 44,135 lots on Tuesday. Open interest rose by 1,811 on Tuesday to 291,738 lots on Tuesday.
Gold prices were supported when dollar/yen weakened further on Wednesday but fell short of another three-year low. Dollar-denominated gold prices tend to rise when the U.S. currency falls, because it gains value in overseas markets.
Equity prices lost ground when OPEC members meeting in Vienna delivered their surprise decision to cut oil output from Nov. 1.
The deal aims to extend a four-year oil price boom, but could also stifle growth among the world's largest economies.
One analyst said higher oil prices could lead to higher interest rates, hampering prospects for sustained recovery.
Gold dealers said the oil supply news helped gold rally not only because its status as a safe-haven asset was renewed, but also because of its use as an inflation hedge.
Gold traders said they still have their eye on upside targets for gold, with Monday's highs at $389.10 for December COMEX gold and $387.75 on spot gold as first objectives. A break of $389.10 could lead to the seven-year high at $391.
"If we break major resistance at $389, we'll see $400. The view to see $400 before December is growing," a trader said.
Traders said they pegged first support at Tuesday's low of $384.30 an ounce, then at Monday's low of $384.00. A break of those levels would send gold back to its lower trading region. They said stop-loss sell orders are thought to lie at $383.40.
Spot gold bullion was quoted higher at $387.00/7.80 an ounce, than $385.40/6.15 late Tuesday. London dealers fixed the afternoon reference price at $385.00.
Silver also jumped in the afternoon rally as COMEX December silver surged 6.50 cents to finish at $5.31 an ounce. The high shot up to $5.34 an ounce from a low at $5.225. Spot silver pulled up to $5.26/5.28, from $5.20/5.22 late Tuesday. Silver was fixed at $5.2250.
NYMEX October platinum lost $0.10 to settle at $705.80 an ounce. Spot platinum was last quoted at $705.25/709.75 an ounce.
December palladium advanced $4.50 to $222.50. Spot palladium was quoted higher at $215/220 an ounce.