LONDON, March 6: Gold bounced from fresh six-week lows on Tuesday as bargain hunters returned to the fray, but analysts expect volatility until stock markets stabilise.

Spot gold hit $632.30 an ounce, the lowest since January 22, but by 1105 GMT it was higher at $644.40/645.50 an ounce compared with $637.60/638.35 late in New York on Monday.

In the near term, gold prices are likely to see continued volatility, albeit remaining relatively directionless as the market tries to gain its bearings, Morgan Stanley said in a research note.

The precious metal is down around 7 per cent since hitting a 9-month high of $689 an ounce seen on February 26 when the market was targetting $700 an ounce.

Japan has taken a step towards normalising interest rates, so the carry trades are being unwound, said BNP Paribas analyst David Thurtell, who added that the direction of gold prices and volatility over the next week could depend on economic data.

Specifically the February US non-farm payrolls data -- a key gauge of the economic health of the United States -- due on Friday, which could determine the direction of stock markets around the world, he said.

The risk is the payrolls are weak, which means there is potential for a further shake-out in equities.

Over the longer term however analysts are still bullish about gold price prospects, but speculators are expected to remain cautious until they are sure equities have stabilised.—Reuters