LONDON, Jan 17: Physical buyers of gold dipped their toes into the market on Wednesday, cushioning the impact of some light profit-taking that pushed prices a touch lower.

Prices have bounced soundly off a two-month low hit nearly two weeks ago, but then stalled as weakness in other commodity markets and a modest strengthening in the dollar triggered some investors to cash in profits on gold.

Spot gold eased to $622.80/623.80 an ounce by 1056 GMT, down from $625.20/626.20 in New York late on Tuesday.

Traders said tumbling oil prices were not helping the mood in gold, but noted the precious metal had put in a much better performance since the start of the year.

Gold is currently down by around two percent, and even at its low point earlier in the month it was only down just over five percent. Oil on the other hand has fallen 16 per cent.

Gold is holding up, but a bit of pull-back down towards $620 is to be expected, I think, one dealer said.

We've had quite a big move up since the fall. I think a lot of people think $620 is a good place to get back in. Oil's still plummeting and gold doesn't seem to be taking a great deal of notice of it.

The jury is still out as to whether commodity prices have peaked, although the recent declines in high-profile oil and copper, which attract the lion's share of investors' money, have severely dented enthusiam for the asset class.

There was talk that many Japanese retail investors had ditched their holdings and moved to equities because of the volatile Tokyo market, but some dealers said a weakening yen could encourage them to buy gold again.

Purchases from Japanese investors helped gold reach 26-year highs last year. I would think there is certainly a significant Japanese element that will look to diversify into something like gold as an anti-inflationary hedge, said Darren Heathcote of Investec Australia.

Silver slipped up to $12.51/12.58 an ounce from $12.55/12.62 an ounce. Platinum inched up to $1,137/1,142 an ounce from $1,135/1,141. Palladium rose to $330/335 an ounce from $326/329.—Reuters