NEW YORK, July 31 (Reuters) - COMEX gold skidded to an eight-day low Thursday as speculators lightened up long positions after upbeat U.S. economic data boosted the dollar, traders said.
Dealer buying and fund interest broke the fall, however, and prices found support below the market.
Benchmark December gold on the New York Mercantile Exchange's COMEX division ended down $2.30 at $355.80 an ounce, its lowest close since July 22, trading from $355 to $359.40. Front-month August lost $2.20 to settle at $354.
It was the third straight weaker close since fund buying on Monday lifted futures to a six-week high at $369.70.
"It is very strange," said a bullion dealer, referring to the session's volatility. "I suspect overall it has been weighed down by the stronger dollar, but perhaps there is the underlying sentiment in the marketplace that dollar strength is only temporary and therefore funds are holding positions with a view to a bounce back at a later date."
A strong greenback is bearish for dollar-denominated gold because it makes the precious metal more expensive overseas.
"Since we aren't seeing physical buying in gold in a big way, it seems more there's short-term profit taking by people who either had a long position earlier or sold into strength," the dealer said.
Spot gold was last indicated at $354.00/4.80, off Wednesday's late quote in New York at $355.90/6.40. London dealers fixed the afternoon spot reference price at $354.75.
Traders said better-than-expected U.S. second-quarter GDP growth and a fall in the number of Americans registering jobless claims bolstered the idea that the economy was rebounding, denting demand for gold as a safe-haven asset.
At the same time, the euro sank more than 1 percent against the dollar at a 1-1/2-week low of $1.1226.
J.P. Morgan technical analysts said they saw a correction developing in bullion back toward $350.
"We warned that this market looked toppy around $366 and that a corrective pullback should be seen. That move is now underway with targets lying around $350. We will then be looking for signs of a base developing for a return to the developing bull trend," they said in a report.
Chartists trace technical support in COMEX December futures at $355 and $350 an ounce, with resistance at $368.
Fund buying and support from a firmer base metals complex supported silver prices Thursday, dealers said.
COMEX September silver gained 6.0 cents to $5.12 an ounce, trading $5.045 to $5.23, touching Monday's contract high in the morning. Futures were flirting with their loftiest level since late February 2000.
Spot silver was worth $5.13/15, versus New York's Wednesday close at $5.06/5.08. It fixed at $5.08.
NYMEX October platinum rose 70 cents to $685.70 an ounce. Spot platinum was hardly changed from morning trade at $684.00/689.00.
September palladium climbed $5 to $182 an ounce. Spot palladium hit $175.50/181.50.