NEW YORK, April 29 (Reuters) - COMEX gold fell to a seven-month low early Thursday, then clambered to higher ground as the dollar fell on data showing the U.S. economy grew a bit slower with more inflation than expected in the first quarter.
Silver also steadied, after extending Wednesday's rout to a new low on fears that a clampdown on bank lending in China will slow its economy and derail a metals boom.
June gold was up 70 cents at $386.60 at 10:01 a.m. EDT. It traded between $388.10 and $377, its lowest price since Oct. 20.
Gold fell $13.20 on Wednesday, after Chinese Premier Wen Jiabao rocked commodity markets by saying China needs to put the brakes on its economy. China had been the main destination this year for metals, grains and other raw materials, enabling commodity markets to enjoy their best run since the 1970s.
"You get the usual overreaction," a floor broker said about the decline in gold. "I think some funds might have doubled up yesterday. They might have got out of their longs and gone short."
Spot gold fetched $386.80/7.60, up from the close at $385.75/6.50. London's morning fix was at $382.75.
First-quarter gross domestic product expanded at a 4.2 percent annual rate, according to an advance report. That was less than the 5.0 percent expansion rate expected and not much faster than the previous quarter's 4.1 percent.
But markets were more worried about a 3.2 percent jump in a key price deflator, which raised the specter of inflation and brought forward expectations of interest rate increase by the Federal Reserve.
"A lot of the selling in gold over the last 36 hours was not only due to what's been happening in China," said Graham Leighton, vice president at bullion dealer Societe Generale, "but was also in expectation about what GDP was going to be. Then, when it came out worse than expected, we rallied.
"I think a lot of the damage has been done," he said.
On Thursday, China ordered some smaller banks to halt lending for several days, which analysts said was the latest move to cool the overheated economy.
Benchmark June gold has declined 14 percent since April 1, when it hit a 15-year high at $433. The liquidation of long positions by commodity funds has also slashed the price of silver by one-third since it peaked this month at $8.50 an ounce, a 16-year high.
May silver was up 6.3 cents at $5.93 an ounce, after falling from $5.98 to $5.545, its lowest price since Dec. 8. It plunged 36.8 cents on Wednesday on worries that Chinese demand for industrial metals will abate.
Silver has many industrial uses in electronics and photography, and often takes its cues from copper, which also fell sharply Wednesday.
Spot silver was quoted at $5.92/96, up from $5.85/88 late Wednesday. It fixed in London at $5.57.
NYMEX July platinum was down $6.5 cents at $790.00 an ounce, bouncing $34 from a contract low at $756. It fell $37 the previous session. Spot platinum was quoted at $782/787. Platinum hit 24-year highs this month above $900.
June palladium was 60 cents lower at $253.00 an ounce. Spot last fetched $245/250.