LONDON, July 31: Gold drifted higher on Tuesday as stock markets recovered and the dollar weakened, but investors remained nervous due to recent falls in bullion price. Spot gold was quoted at $666.60/667.40 an ounce by 0959 GMT, compared with $664.60/665.40 late in New York on Monday and Friday's two-week low of $656.90.

The dollar has resumed its weakening trend and stock markets have started to recover globally, which means investors' funds should be rolled back into the metals. I am cautiously positive and expecting a recovery in the gold price.

The dollar inched lower against the euro and high-yielding currencies recovered some ground as a recovery in stock and credit markets diminished risk aversion ahead of a barrage of US and euro zone economic data.

Gold often moves in the opposite direction of the dollar.

Following the recent surge of buying and then quick liquidation, long positioning in gold is again relatively muted, which should limit any further downside, John Reade, head of metals strategy at UBS Investment Bank, said.

But the metal is at the mercy of the dollar and of risk aversion, which probably declined slightly yesterday. But following the recent asset market turmoil we are not confident that a day of relative stability points to an end to market wobbles, he said in a research note.

London-listed Kazakhmys said gold and silver production from its own material was 6 per cent higher and 6 per cent lower respectively in the second quarter of 2007 from the first quarter.

Polyus Gold, Russia's top producer of the metal, said its output output fell by 6 per cent in the first half of this year to 470,000 ounces from 502,000 ounces a year ago.

In other metals, technical buying sharply lifted platinum to $1,290/1,294 an ounce from $1,268/1,272 in New York.

Platinum had come under pressure after Nissan Motor Co. said on Friday it had developed a catalyst for gasoline cars that halves the use of precious metal components, including platinum, to clean tail-pipe emissions.—Reuters