May 26, 2006	Friday	Rabi-us-Sani 27, 1427

LONDON, May 25: Gold drifted higher on Thursday after tumbling in US trade, with bargain-hunters and physical buyers slowly entering the market on dollar weakness, dealers said.

But market players remained wary after recent volatile price moves and looked to other markets for direction.

There is a lot of uncertainty and people are waiting...I suspect the next move will come from outside the market, maybe from the stock market or the dollar, Matthew Turner, analyst at Virtual Metals, said.

When the price falls by nearly $100, you have to think it is going to cause some people to question the bullish assumption. The sentiment that it can only go up has been damaged, he said, but added that gold had an upward bias in the short term.

Spot gold rose as high as $647.30 an ounce and was at $643.20/644.00 by 1154 GMT, against $639.20/640.00 late in New York on Wednesday.

Gold, used in jewellery and as an investment, fell about five per cent to $637.40 in US trade as profit-taking and fund selling pushed it away from a 26-year high of $730 on May 12.

The dollar edged lower against other major currencies. Given the uncertain outlook for interest rates in the United States, markets have been increasingly volatile in recent weeks.

We believe that gold needs to find a range and that volatility must decline before investors and physical customers regain confidence to buy the metal, said John Reade, precious metals analyst at UBS Investment Bank.

Some analysts said gold, which generally moves in the opposite direction to the dollar, was vulnerable to further dips.

For now the market remains in consolidation mode with further waves of selling likely to test back to $600-$620, an area where chart support should prove extremely strong, said James Moore, precious metals analyst at TheBullionDesk.com.

Over the past month, about 15 tons had been withdrawn from the product, which tracks prices of the metal. Such gold funds, traded on stock exchanges, have accumulated about 480 tons of gold since their launch about three years ago.

In other metals, platinum’s fall below $1,300 an ounce sparked buying interest from jewellers in China, which accounts for half of global platinum jewellery demand.

Platinum rose to $1,285/1,295 from $1,280/1,290. Last week it hit a record high of $1,336.

I think the demand is quite steady in China, but there’s also a possibility that some jewellers are using old stocks, said a dealer in Hong Kong.

Platinum, mainly used in jewellery and to clean car exhaust emissions, has risen 37 per cent this year as investors diversify into precious metals on tension in the Middle East, worries about rising oil prices and the volatile dollar. Palladium was down $1 at $344/349, while silver fell to $12.39/12.49 an ounce from $12.45/12.55.—Reuters