LONDON, Sept 14: Gold bounced on Thursday, aided by firmer oil prices that triggered buying across the commodities sector, but traders retained a cautious outlook after this week's heavy losses.

Bullion prices fell around 9.5 per cent from a peak above $640 an ounce last week to an 11-week low on Wednesday, caught up in a wider commodities rout, but also pressured by a firmer dollar and fears of central bank sales.

Spot gold gained to $593.20/594.70 a troy ounce, up from New York's late quote on Wednesday of $587.50/589.10.

We're in difficult times at the moment because investors are caught between a rock and a hard place, said Darren Heathcote of Investec Australia in Sydney.

They are obviously afraid this is going to break down into that new band and therefore, we could see the end of the bull run. Traders said prices would need to hold above $580 to avoid another big sell-off.

Crude oil rebounded above $64 a barrel as bargain hunters stepped in after a month-long selling spree, which sliced 12 per cent off prices.

The current mood of oil/dollar sensitivity seems likely to continue with gold still at risk of further pressure, James Moore of The BullionDesk.com said in a daily note.

Demand in India, the world's biggest gold consumer, is due for a seasonal pick up, although global jewellery demand was seen sharply lower (down 19 per cent) this year due to high and volatile prices.

UK-based precious metals consultancy GFMS said in an update to its 2006 price survey released on Thursday that it expected strong investor buying and a downturn in the dollar to drive gold through $700 an ounce by the end of the year.

Not everyone shared that bullish view. I think most people are still in bearish mode. Oil is up but it's not exactly raging on. I would still sell the rallies for now, a second trader said.

Also weighing on the market was the spectre of central bank gold sales. Analysts estimate that those banks with an agreement to limit their annual gold sales still have around 150 tons of gold to dispose of before late September.

Silver followed gold's lead and rose to $11.27/11.34 an ounce from $11.05/11.12 an ounce in New York. Platinum gained to $1,187/1,192 an ounce from $1,177/1,182 an ounce, while palladium was up at $323/328 from $314/319 an ounce.—Reuters