NEW YORK, Oct 24 (Reuters) - COMEX gold jumped early Friday to its highest since setting a 7-year peak last month, resuming its rise after a 1-day hiatus in a flurry of stop-loss fund and trade buying, floor brokers said.
As it has done all year, a weaker dollar against the euro Friday encouraged fund rotation back into gold, lifting the benchmark December contract above Thursday's high of $388.10 an ounce to a new one at $390.40 an ounce this morning.
At 0937 EDT, the contract was up $5.00 at $390.00 an ounce, having bottomed at $394.30 overnight.
Speculators are now gunning for the $394.80 bull market high set on Sept 25, with many looking for a fast test of $400 an ounce if it breaks through.
Spot gold was quoted at $389.15/85, up from the close at $384.20/70 and the fix by London bullion dealers Friday morning at $384.60.
"It's basically all fund buying. They had stops first around $388-ish then it broke $389.40 and went crazy," said a trader at a commercial bank. "Now were backing and filling."
The euro was quoted at $1.1820/23, up from $1.1795/01 late Thursday.
Low U.S. interest rates, rising government deficits and recent U.S. efforts to orchestrate more favorable exchange rates for American exporters have sent the dollar tumbling against foreign currencies this year, making gold look more attractive as an alternative.
"An unstable and nervous dollar and equity markets continue to provide the catalyst for support in the gold market," wrote analyst James Moore at TheBullionDesk.com. "Support is still very strong for gold at the moment with any weakness quickly absorbed by the physical community as we enter one of the areas of peak demand through the year."
Consumption from India and the Middle East has prevented gold from moving down too far in the run-up to Diwali celebrations and the Muslim holiday Ramadan.
December silver was 1.8 cents firmer at $5.19 an ounce. It rose to its highest since Sept 29 at $5.20 an ounce from a low at $5.15. Spot silver fetched $5.17/19, up from $5.15/17 late Thursday. The fix was $5.1475 an ounce.
The NYMEX January platinum contract retreated $9.70 to $736.00 an ounce, correcting after its run to new highs. Spot platinum was quoted at $735.00/740.00.
December palladium was $2.95 lower at $199.50 an ounce. Spot palladium was priced at $193.00/198.00.