LONDON, Feb 6: Gold rose above $650 an ounce on Tuesday on firmer oil and a slightly weaker dollar, and analysts said it could jump if it holds onto recent gains a bit longer.

Gold broke the $650-an-ounce mark several times last week but profit-taking pushed down prices, which have risen about nine per cent since Jan. 5 when it fell to a two-month low.

Spot gold was quoted at $653.40/654.10 an ounce by 1052 GMT, higher than $649.00/649.70 late in New York on Monday, when it rose about $2 on renewed buying interest from funds.

The market has been able to consolidate around $650 which should be a solid base. The general positive feeling for commodities over the last couple of days and the ongoing dollar weakness are very supportive for gold, Frederic Panizzutti, Germany-based analyst at MKS Finance, said.

We will not be surprised if further inflow of fresh investment into gold happens over the coming few days. The longer we can hold the $650, the stronger the base will be.” Oil bounced back above $59 a barrel as the coldest weather of the US winter was expected to draw down heating oil stocks.

Prices rallied to a one-month peak of $59.95 on Monday after rising 6.5 per cent the previous week.

It will just follow oil, said Peter Tse, a dealer at Scotia Mocatta in Hong Kong.

Gold is generally seen as a hedge against oil-led inflation and often moves in the opposite direction of the dollar.

The dollar eased against the euro on Tuesday. Experts said gold had potential to rally this year.

Natexis Commodity Markets said it remained positive towards the gold price as the prospects of a weakening of the dollar and a generally supportive geopolitical backdrop remained in place.

It saw an average gold price of $670 this year and $710 in 2007. There is also a tendency for some investors to move part of their assets into alternative investments such as gold, it said, adding any decline might be limited.

Prospects for firm metal prices have lifted physical activity in the gold market.

Platinum rose to $1,178/1,183 from $1,165/1,170 an ounce, while palladium was up $1 at $337/342. Silver increased to $13.61/13.66 an ounce from $13.47/13.52.—Reuters