NEW YORK, Oct 23 (Reuters) - COMEX gold on Thursday stretched its recovery to within $7 of September's seven-year high before bulls used a moment of steadiness in the dollar as an excuse to pocket some winnings on this week's bullion rally.
The dollar's fall to a 13-day low against the euro overnight made gold cheaper for European buyers and helped lift benchmark December gold to $388.10 an ounce, its highest level since Sept. 30 and 10 cents better than Wednesday's 22-day high.
December gold at 0940 EDT was off 70 cents at $386.10, comfortably above the day's low at $385.30, after chalking up a $4.80 gain on Wednesday.
Bush administration efforts to talk the dollar down to more competitive levels for U.S. exporters have been a godsend to gold this week. It is up almost $20 since Friday.
"Today I would say it's been a little bit of profit-taking over the last couple of days' move," said Frank Aburto, a broker with F.C. Stone. "It's just based on some of the things that have been said about the dollar from the government."
"The overall feeling of the market is bullish from various areas," he said, adding, "There is no longer that heavy selling of hedge trading from the producer area."
Gold topped at $394.80 on Sept. 25, its highest level since mid-1996. Overbought investors began liquidating positions this month and the contract hit a seven-week low at $366.50 Friday.
Commodity funds have been reliable buyers on the dips even as U.S. indicators paint a brightening economic picture. Commercial demand for gold bars and coins from India and the Middle East also underpinned the market in the run-up to October's Diwali festival and the Muslim holiday Ramadan.
The euro topped at $1.1846 Thursday, less than $1 from the all-time high against the dollar set in late May.
Spot gold hit $387.50 an ounce and was priced at $384.30/4.75, down from $386.00/6.50 late Wednesday. London bullion dealers fixed the morning reference price at $386.75.
"It's bouncing around with the currencies here," a bullion trader said. "The euro was $1.1846 and gold was $387.50. Now it's back under $1.18 and we're just above $385. So that correlation is back on track, it seems."
December silver was up 1.5 cents at $5.15 an ounce. It followed gold to a 23-day high at $5.19, off a low at $5.105. Spot silver fetched $5.12/14, up from $5.11/13. The fix was $5.145 an ounce.
The NYMEX January platinum contract was up $4.10 at $743.50, hitting a fresh high at $746.80. Spot platinum was quoted at a 23-year high at $742.00/747.00.
"There has been more demand from the Far East/Japan area, with the yen perking up," Aburto said. "It looks like the Japanese have been in both markets, the platinum market and also gold."
December palladium was up $2.25 at $203.90. Spot palladium fetched $198.00/203.00.