NEW YORK, Aug 22 (Reuters) - COMEX silver fell to a six-month low then rebounded on short-covering to close higher Thursday, but sympathy buying in gold was restrained as investors kept diverting money back into stocks.
Trading this week in precious metals has been choppy, with many players away on vacation. Adjustments before a UK market holiday on Monday exacerbated the swings, dealers said.
September silver closed up 4.5 cents at $4.465 an ounce. It topped at $4.49, recovering from an early test of $4.38, its lowest since Feb 7. Estimated volume was a busy 20,000 contracts.
Spot silver was last quoted $4.46/48, up from $4.42/44 late Wednesday and Thursday's fix at $4.42.
"It's just huge shorts," said a bullion dealer. "I think the shorts got caught the wrong way -- it looked like it was going down for the count."
He added, "Gold kind of followed silver to some degree."
London dealers said silver, widely used in electronics and photography, was under pressure from worries about industrial demand as the economic rebound struggles to get traction.
December gold ended off $1 at $308.30 an ounce after trading $310.10-$306.10, holding at the $306 low plumbed in a powerful shakeout on Monday.
Spot gold closed at $306.95/7.45, off from $307.70/8.20 late Wednesday but up from the late fix in London at $305.40.
One dealer said investment in gold equities provided a buy signal for futures.
"The XAU shot up and we followed the XAU," said the broker, referring to the XAU index of gold and silver mining shares on the Philadelphia Stock Exchange. "There was good fund selling this morning and that fund selling has not been there for a while."
Atypically, the XAU -- among the best performing indexes when most of Wall Street was diving this year -- rose even though the Dow Jones industrial average was up 57 points in afternoon trade, clearing the psychological 9,000 level.
Physical demand from India, the world's biggest consumer of gold, as its festival season gathers way has supported spot gold around $305.
Gold was one of the few markets where investors felt flush enough to redeploy cash to Wall Street. Confidence is rising that equities carved out a bottom when their swoon to five-year lows this summer hoisted gold to 2-1/2 year highs in June.
"Some people are taking it out of here with profits they had in gold and putting it back in the stock market. Money seems to be shifting," said another broker.
Remarks Wednesday by three Federal Reserve Bank governors throwing cold water on financial market hopes for another round of rate cuts to stimulate the economy may have also weighed on gold, especially via the positive reaction by the dollar.
The Fed's 11 cuts last year brought rates to 40-year lows. Low dollar deposit rates were a major impetus for gold's bull run this year, by raising the cost of funding forward gold sales by mining companies and speculators.
NYMEX October platinum snapped a five-day losing streak, rising $2.40 to $544.90 an ounce. Spot platinum was at $542.90/550.90.
September palladium ended up $1.50 at $320.50 an ounce. Spot last fetched $316.50/328.50.