NEW YORK, Sept 25 (Reuters) - COMEX gold fell Wednesday as U.S. stock prices bounced from multiyear lows, with gold bulls taking a breather a day after bullion nearly stretched its 2002 safe-haven rally to three-year highs.
The Dow Jones industrial average was up more than 2 percent in afternoon trade, retracing Tuesday's plunge to a four-year low. The Nasdaq rebounded 3.2 percent from its lowest since 1996.
December gold fell $3.60 to settle at $323.60 an ounce. It traded from $328 to $323.40, consolidating Tuesday's surge to a 13-week high at $329.30.
Spot gold was last priced at $322.00/50, off from $326.10/60 at Tuesday's close. Bullion dealers fixed London's afternoon spot reference price at $325.15.
"It was pretty much that we broke that $325 level in spot and when the equity market came back so strong...funds turned seller and dumped everything," said a bullion dealer. "One commission house was seen as a seller all day."
Bullion prices are 17 percent higher than when they started 2002 and traders are still looking for a challenge of $330.30, the year's high on June 4 which brought prices within range of the October 1999 two-year peak at $338.
The rally continues to be driven by investor jitters about global political unrest, economic growth and corporate accounting malfeasance. But now financial markets see a far greater risk of a second Gulf War and see gold as one form of portfolio insurance.
"Iraq still looming over our heads gives us more upside potential," said a COMEX floor broker.
Baghdad on Wednesday dismissed Britain's dossier on Iraq's weapons programs as "lies and allegations," promising to respond in detail to the document used by Prime Minister Tony Blair to make his case for helping the United States disarm Iraq by military force, if necessary.
An advisor to President Saddam Hussein on Wednesday promised United Nations arms inspectors unrestricted access to visit any site.
Meanwhile, the United States said it had enlisted support from NATO allies on the threat posed by Iraq, even as Russia and Germany resisted.
Leonard Kaplan, president of Prospector Asset Management, wrote in his daily commentary that gold was most assuredly in a secular bull market, but he did not see it surpassing the old highs in the coming days.
"We need for the gold market to consolidate above $325 per ounce to gain the required strength, fury and conviction necessary for a successful onslaught," he wrote.
"Of course, my opinion would be immediately discarded if some 'event' occurs which would necessitate higher gold values," Kaplan said. "And in this world, at this time, such an 'event' has rather significant probability."
December silver fell 7.0 cents to $4.60 an ounce, trading $4.68-$4.58. Spot silver closed at $4.58/60, off $4.64/66 late Tuesday. It fixed at $4.62 an ounce.
NYMEX October platinum skidded $13.30 to $559.60 an ounce. Spot platinum was last at $559/564, down from the previous close at $574/579.
"It was probably some speculative selling based on the stronger yen," said a refinery dealer, referring to TOCOM platinum sales when the dollar fell against the yen overnight.
"It was overbought, the platinum. We've seen it struggling up there in the $570-$575 region a few times," he continued. "It think it's just too expensive up there and don't see much industrial buying."
December palladium fell $4.45 to $325.10. Spot palladium fell to $321.10/333.10 from $325/335.