LONDON, Feb 7: Firmer oil prices helped gold to advance on Wednesday, but dealers were cautious ahead of key oil stocks data that might affect the direction of the energy market.

People are happy to trade gold from the long side, but they are cautious as they want to know whether we are going to be able to break through resistance, said David Holmes, analyst at Dresdner Kleinwort Investment Bank.

They are looking for the energy data this afternoon because that could have an influence on the oil price. If there was a serious drawdown in stocks, that could be a catalyst for gold to make a break on the upside. The United States will publish heating oil stocks data for the week to Feb. 2 at 1530 GMT.

Crude prices climbed back above $59 a barrel, lifting gold's appeal as a hedge against inflation.

Gold rose as high as $656.25 an ounce before easing to $655.00/655.70 by 1108 GMT, against $653.20/653.90 in New York late on Tuesday, when it gained more than $4.

Analysts reported good interest from gold investors happy to buy gold on prices dips. But if the metal managed to rise above $660 and consolidated around that level, the market might attract more buyers.

I think the basic trend is bullish, but it's still too early to buy heavily from here, said Akira Doi, a director at Asia-based Daiichi Commodities Co. Ltd.

The market is very choppy now as we are seeing many short-term players looking for a chance to take profits on price gains,” Doi said.

UBS Investment Bank upgraded its forecasts for the gold price to $650 in one month from now from $630, and to $700 in three months from $650 predicted earlier.

We believe that fundamental commodity investors are very positive for gold's prospects this year, although their positions are smaller than they would like and they are hoping for an opportunity to buy gold on dips, it said in a report.

In other metals, platinum jumped to a 10-week high of $1,195 an ounce before easing to $1,192/1,197, versus $1,174/1,180 in the US market.—Reuters