NEW YORK, May 27 (Reuters) - COMEX gold stormed to within a whisker of $375 an ounce when futures trade reopened after a long weekend Tuesday, as the market focused on options expirations and the euro's rise to a lifetime high against the falling dollar.
"I would assume there will be some stops above there if we got through," said a bullion trader of the $375 level in benchmark gold. "I think it's more psychological than technical."
At 9:27 a.m. (1327 GMT), June was up $4.30 at $373.10 an ounce, trading from $370.10 to $374.90, its highest since gold began falling back from its 2003 highs on Feb 7.
Spot gold was quoted $371.85/2.55, up from $368.40/9.10 on Friday when the market wrapped up early before the U.S. Memorial Day holiday Monday and a three-day weekend for UK markets. On Tuesday, London bullion dealers fixed the morning spot reference price at $372.35.
Much of the business on the floor was linked to end-of-day expirations of June options, with call option holders looking to move underlying futures higher and writers defending a rise against $375, the closest popular strike price.
"I think they are going to gun for that sooner or later," said a floor broker. "If the dollar keeps getting pounded here we're going to see that $375 strike."
The euro was trading at $1.1911/14, after topping overseas at $1.1925, exceeding the old high hit on its first day of trade on Jan. 4 1999.
The dollar's plunge this year helped lift gold to a 6-1/2 year high at $391.70 on Feb. 4, when the panicky markets were buying into safe havens before the U.S. went to war in Iraq.
Speculators liquidated those positions in February and March, pushing gold all the way down to $320 in early April.
After a $55 rally over the past month and a half, the market is almost as overbought as it was in February.
The CFTC said late Friday that the net noncommercial long position swelled to 65,741 contracts as of last Tuesday from 42,420 the previous week.
Analyst Timothy Evans at IFR/Pegasus said the long is the biggest since the historical 66,814 contract extreme of Feb. 4. "The market may be nearing the end of its tether."
"This does suggest that the market's easiest gains are behind it and that a topping pattern may now begin to form," Evans wrote in a commentary."
July silver was up 0.3 cent at $4.65 an ounce, trading $4.71-$4.64. Spot silver was at $4.63/65, unchanged from late Friday. The London fix was $4.6825.
On the NYMEX, palladium continued to find strength and regained the $200 level after Japan's TOCOM benchmark April moved up by its daily price limit, defying weak fundamentals and negative price forecasts.
The metal, used mainly in auto-catalysts to clean exhaust fumes, has rallied since news reports last week thatwas poised to switch back to using cheap palladium instead of platinum in its catalytic converters.
June palladium was $9 higher at $192.00 an ounce, having topped at $208. Spot palladium last fetched $191.00/197.00.
July platinum was up $12 at $676 an ounce. Spot was at $683.00/688.00.