The dollar rode high in Europe yesterday but plummeted in U.S. trading while the Canadian dollar rallied.

"I can't think of an argument against the U.S. dollar right now," said Leonard Feldman, head of the Chicago office of Sinclair Securities Inc. "It's going to get stronger in the longer term but, on a day-to-day basis, it's one of the most volatile and nervous markets I've ever seen."

Gold rallied sharply to close at $307.25 an ounce in New York, up from $298 Tuesday. The New York Commodity Exchange settled it at $307.70, up from $298.

In Zurich gold was unchanged at $303.50, and in London it dropped to $302 from $306.25.

Silver rose to $5.22 an ounce from $5.03, and it settled on the Comex at $5.225, up from $5.04.

The dollar rose sharply on foreign markets in response to higher Eurodollar rates and expectations that they will go higher still.

However, traders took profits in later U.S. trading, taking back almost all of the gains.

Just as its U.S. counterpart has reached an overbought technical position, the Canadian dollar rallied almost a cent from its nonstop decline, closing at 77.84 U.S. cents, up from 76.89.

After a weaker opening in London, the pound closed at $1.7320 compared to $1.7380 at Tuesday's close, and it rose to $1.7440 in New York. A Barclays Bank International dealer said the sterling fell as low as $1.72 during trading.