NEW YORK, Dec 30 (Reuters) - COMEX gold eased in mixed year-end trade early Monday, but speculators still viewed the yellow metal as the safest bet with the United States locked in nerve-racking standoffs with Iraq and North Korea.
Trade was thin and two-way, with players getting their last chance to re-jig positions before an early close on Tuesday and the New Year holiday Wednesday.
"There's been a lot of illiquidity that's driving the market back and forth," said a floor broker. "The upside's been the predominant winner because funds continue to add on to positions."
Futures were orbiting the $350 an ounce level, an easy trade from the recent six-year high hit as gold was bought for portfolio insurance, in the belief that the Bush administration is bent on going to war to disarm Iraq.
February gold at 0925 EST was off $1.60 at $348.10 an ounce, trading $350.80-$347.30. Friday's close at $349.70 was its highest in almost six years, as was the Dec 19 intraday peak at $355.70.
"So many people believe that within three months there's going to be another major terrorist attack in New York," the broker said. "Once Bush bombs Iraq, as if that's a foregone conclusion, they're going to attack us -- so many are thinking that way."
A diplomatic crisis over North Korea's nuclear program added to geopolitical jitters. The killing of three American medical aid workers in Yemen also helped fatten gold's risk premium.
Oil prices are at two-year highs over $33 a barrel, enhancing gold's role as an inflation hedge, while the dollar plumbed three-year lows against the euro, making bullion more affordable to European investors.
So gold is now up some 25 percent in 2002. It has has not been so overbought since 1996. Dealers said there is some risk of profit-taking sending prices down, but that may be balanced by interest in putting gold on the books for year end to offset stock market losses, dealers said.
CFTC's Commitments of Traders data issued after the close Friday showed large speculators net long 57,105 (100-ounce) COMEX gold contracts as of Tuesday, up from 55,200 lots a week earlier.
"Any selling that does occur appears to be only long liquidation and speculators and investors are holding historically massive long positions and, at least at this time, feel quite comfortable," wrote Leonard Kaplan, president of Prospector Asset Management in Monday's commentary.
Spot gold last traded at $347.80/8.40, down from $348.90/9.50 at the close Friday. Monday's early fix in London was $348.50.
COMEX March silver futures were off 0.8 cent at $4.715 an ounce, in a $4.755-$4.685 range. Spot silver was at $4.69/71, off from $4.70/72 at Friday's close. Monday's fix was $4.72.
NYMEX April platinum was up $10.40 at $599 an ounce. Spot platinum hit $602.00/607.00.
NYMEX March palladium was 25 cents firmer at $239 an ounce. Spot palladium traded at $235/243.