NEW YORK, Aug 21 (Reuters) - COMEX gold was lower early Wednesday, gyrating in a summer range with Indian demand supportive and investors keeping bullion close to hand while considering the inflationary implications of surging oil prices.
Gold continued to be yanked around by the volatile currency markets, waiting for participants to stroll back from summer vacations and seemingly stuck between the August low near $300 and the top around $320.
"Although oil prices have rallied sharply of late, underscoring the saber rattling between the USA and Iraq, although German officials specifically stated that they would not sell gold to aid the flood victims in that nation, and although Indian gold demand will be higher in weeks to come, professional short selling is, at this point in time, enough to keep gold tamed within its cage," Leonard Kaplan, president of Prospector Asset Management, wrote in a commentary.
December gold at 0949 EDT was off $1.90 at $308.50 an ounce, retracing Tuesday's $2.70 gain. Wednesday's $311-$307.50 range was an easy trade from the $306 low in Monday's swift shakeout.
Spot gold was quoted at $306.90/7.50, down from Tuesday's New York close at $308.75/25 and Wednesday's morning fix by London bullion dealers at $308.35.
Demand from India, the world's largest consumer of physical gold, has reportedly put a floor in spot gold at $304/305.
India is entering its festival season of peak demand. But a weak monsoon is expected to severely crimp rural incomes and slash demand from traditional buyers of gold ornaments and trinkets compared to last year's levels.
"We're watching the support levels we hit on Monday," said a bullion trader. "If the dollar continues to strengthen, one could expect we'd see a retest of those types of numbers."
The euro was softer at $0.9771/75 early Wednesday, from the close at $0.9795/00. The firmer greenback ups the price of bullion for overseas investors who must exchange their own currencies to buy dollar-denominated gold.
The Dow Jones industrial average was up 73 points in early trade, as investors showed cautious optimism that the summer bear market that helped lift gold to 2-1/2 years highs in June was over.
Crude prices also backed off after touching 18-month highs over $30 a barrel in New York trade Tuesday.
"To the extent that higher prices are somewhat inflationary that has an impact on a lot of things," the dealer said. "But oil markets are so volatile that one month does not a trend make. So I'm not sure what the correlation is lately on gold and oil."
September silver was 0.8 cent higher at $4.445 an ounce in a tight $4.43-$4.46 range. Spot silver was quoted $4.44/46 versus $4.43/45 late Tuesday. The fix was $4.44.
NYMEX October platinum continued its retreat, down $4.20 at $542.50 an ounce. Spot platinum was at $540.50/548.50.
September palladium was down $3 at $319 an ounce. Spot last fetched $315/327.