Comex precious metals rebounded on Friday as traders switched out of the dollar after mixed US economic data and assessed whether gold's fall from 15-year highs cleared the way for the 2004 rally to resume.
Worries about increased violence in Iraq gave background support and gold got an extra lift from a surprise 0.2 percent drop in March US industrial production.
June gold ended up $3.30 at $401.60 an ounce, reversing a $2.20 loss on Thursday, when gold hit a five-week low at $396.20. The day's range was $397.50 to $403.30.
"After that big drop, it can only be characterised as a bounce. I think there is more room on the downside in view of the fact that the dollar has appreciated considerably," said Ray Nessim, president of investment bullion distributor MTB. "Overall, the trend is up, but it could certainly resume the upturned from lower levels," he said. "Same thing in silver."
Estimated gold volume was a moderate 63,000 lot. That compared with 75,450 on Thursday's shakeout, which brought open interest down whopping 20,629 contracts.
Weaker-than-expected US factory output was balanced by a 6.4 percent surge in housing starts, showing low interest rates are still feeding the important US home-building sector.
"For at least a year and half now, these dip buyers have made real nice profits and we're going to have to see if that returns," said James Pagoda, a vice president of precious metals at Mitsubishi International Corp.
"But, if the data keep coming in fairly positive for the economy, the market is still set up to have a larger move on the downside from the acceleration of the liquidation of the longs," Pogo added.
Spot gold closed at $400.15/85, up from $398.25/9.25 late on Thursday. London's late fix was $400.85.
The euro rose to $1.2046 against the dollar, a day after hitting a four-month low at $1.1863. The euro's rise to lifetime high near $1.30 two months ago was a key factor in gold's Bull Run.
June gold peaked at $433 this month. Now traders are looking at $390/$391 on the charts as a make-or-break support level for the medium term.
Financial markets have been roiled by uncertainty about whether the Federal Reserve will soon raise US interest rates from 45-year lows.
Worry about consumer price inflation raised speculation early this week that a tightening could come by summer. Higher dollar deposits would raise the carrying cost of gold, with its zero yield.
Subsequent mixed data caused a rethink, as did on Friday's remark by Richmond Federal Reserve President Alfred Broaddus that he thought the Fed was some way from seeing conditions for a rate increase.
May silver rose 6.7 cents to $7.145 an ounce, trading from $7.03 to $7.24. Silver declined from a 16-year high of $8.50 on April 2 to $6.83 on Wednesday.
The silver market does not have as many participants as gold.
The lack of liquidity has fanned extreme moves this year as big commodity funds moved in and out, leaving big spaces on the charts where no pricing activity took place.
These are now targets for technical analysts and floor traders.
"It's out of its mind here. Some good fund buying is coming back in silver," said a Comex broker.
"There is a gap between $7.18 and $7.35. We're in that gap right now and, I guess, we're going to try to fill that gap."
Spot silver rose to $7.12/15 from $7.05/09. On Friday's fix was at $7.115.
Nymex July platinum fell $3.40 to $918 an ounce. Spot was quoted at $920.00/925.00.
June palladium went up $1.90 to $313.75 an ounce. Spot palladium fetched $309.50/315.50.