NEW YORK, Nov 26 (Reuters) - COMEX gold jumped to a 7-1/2 year high Wednesday after strange fumes hospitalized six New York City subway workers, but failed to hold over $400 an ounce after police said the incident was not a terror attack.
The futures market was extra jumpy before Thursday's U.S. Thanksgiving holiday and a day off on Friday for New York commodity exchanges.
"Between that and the dollar really coming off today -- that whole story continues to be positive for gold," said Amaury Conti, a gold equities trader at fund management firm U.S. Global Investors. "It may be a little exaggerated today because of thin trading conditions. A lot of guys are out."
Fund and dealer buying lifted February 2004 gold to $402.00 an ounce, beating last week's $401.80 high, on news that six workers were treated for exposure to an unknown substance which caused an odor in one of the city's subway tunnels.
But gains were pared after the police said no subway line had been shut down and the contract closed at $398.00 an ounce, up $5.60, and well above its session low of $391.80.
Estimated gold volume was 65,000 contracts, comared to Tuesday's whopping official count of 155,173. There were 7,401 switches and 9,498 December delivery notices issued on first notice day.
Spot gold hit $400.55 and was last quoted at $396.25/7.00, up from Tuesday's close at $390.85/1.55. London's afternoon fix was $396.00.
Gold was rising before the incident, shrugging off more strong U.S. economic data and focusing on the dollar's fall.
The weak dollar has fueled foreign demand for gold this year, because it makes gold cheap in foreign currencies.
The euro rose to $1.1925/30 from $1.1784/89 late Tuesday, closing in on the $1.1977 lifetime high hit last Wednesday, the day gold first traded above $400.
October durable goods orders rose 8.1 percent, the biggest monthly jump since July 2002, while a drop in weekly unemployment claims put to rest fears of a jobless recovery.
The University of Michigan's final November reading of its consumer sentiment index rose to 93.7 from 89.6 in October.
Tuesday's report that third-quarter gross domestic product grew at an 8.3 percent annual rate, its fastest in two decades, briefly took the wind out of gold, which was still consolidating after last week's foray above $400.
Thanks to the upbeat economic numbers, the conversation is starting to switch to overheated growth, which could fan interest in gold as an inflation hedge, dealers said.
"It is really following the euro today. But I'm just surprised at the euro strength," said James Pogoda, a vice president of precious metals at Mitsubishi International Corp. "I thought some of these numbers would be dollar-positive. It makes you wonder how high (gold) can go."
The recovery scenario helped industrial metals, including silver. March silver settled up 5.7 cents at $5.382. It traded from $5.31 to $5.415, bringing it near the 3-1/2 year high at $5.45 on Nov 17.
Spot silver rose to $5.34/36 from $5.29/31 late Tuesday. Wednesday's fix was at $5.30.
At the NYMEX, January platinum rose $10.20 to $768.00 an ounce. Spot platinum fetched $765.00/770.00.
March palladium eased 40 cents to $190.00 an ounce. Spot was at $187.00/192.00.