NEW YORK, Aug 29 (Reuters) - COMEX gold was levered back up by a weakening dollar early Thursday, with investors getting confirmation that the U.S. economy was sluggish in the second quarter.
The dollar slipped against the yen and euro, while Wall Street got off to a shaky start 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.
A weak dollar makes gold more affordable for non-U.S. investors.
COMEX December gold shook of Wednesday's late fund-driven sell-off and at 0944 EDT was up $3.20 at $314.10 an ounce, trading $310.80-$314.80. Spot gold was last at $312.90/3.40, up from Wednesday's close at $309.65/0.15 and London's early fix at $310.65.
"It's the stock market weakness. It's the dollar. Otherwise, not a whole lot is going on," said a bullion dealer.
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.
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, unemployment claims rose to 403,000 last week from 395,000, another signal that the recovery is not getting much traction.
The Dow Jones industrial average was off 1 percent in morning trade. But the XAU index of gold and silver mining shares, recently a reliable leading indicator for daily gold price moves, was up 2 percent.
Currency strength also makes it cheaper for mining companies to continue unwinding forward sales.
"We have seen a little bit of still-good producer buy-back support," said the bullion trader. "It's (range is) $305-$313 and it looks like we're poised to break the upside."
He continued, "We've got a long weekend coming up and I don't think anyone wants to be short."
Dealers said worries about the Bush Administration's policy aiming at a regime change in Iraq was a potential support, especially if higher oil prices choke off growth.
"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.
September silver was up 3.0 cents at $4.555 an ounce, trading $4.52-$4.565. Spot silver was at $4.53/55, up from $4.50/52 late Wednesday. It fixed at $4.495.
On the NYMEX, palladium was receding after a puzzling squeeze to $380 early in the week. December palladium is now the active contract, with September delivery notices starting Tuesday, and was off $5 at $340 an ounce. Spot palladium was last quoted at $335/345.
October platinum was up $5.30 at $565.50 an ounce, hovering under Wednesday's contract high of $578. Spot platinum fetched $563.80/571.80.