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SINGAPORE, Apr 12 (Reuters) Gold firmed on Wednesday but remained below $600 an ounce as selling by Japanese investors and a lack of support from the physical sector curbed gains.

Spot gold rose to $598.50/599.30 an ounce from $595.00/595.80 late in New York on Tuesday, when the metal reached $604 an ounce -- a level not seen since December 1980.

Investors have poured money into precious metals to diversify their portfolios on worries about rising energy costs, tensions in the Middle East and uncertainties over the dollar's outlook because of the U.S. trade and budget deficits, dealers said.

Gold's latest rally scared off jewellers in Asia, but Yukuji Sonoda, a precious metals analyst at Daiichi Commodities in Tokyo, said consumers would eventually get used to the high bullion price as fundamentals remained strong.

''The next target is $620,'' said Sonoda, referring to a level also seen in December 1980.

''Maybe, by the end of April or the beginning of May, India, China and Japan will start buying again,'' he said.

The wedding season is under way in India, the world's largest consumer, when demand for gold jewellery normally picks up. Gold forms a crucial part of the dowry basket, with parents giving gold ornaments for their daughters for financial security.

In Japan, benchmark gold futures on the Tokyo Commodity Exchange, currently February 2007, fell 17 yen per gram to 2,306 yen ($19.52), having risen to an 18-year high of 2,332 yen the previous day on fund buying.

Buying from Japanese investors has helped gold reach a multi-year highs. Japanese retail investors, who have reaped big returns from trading stocks, have been shifting part of their proceeds into gold and other commodities to earn larger profits.

Tokyo gold rose about 60 percent last year, while the Nikkei average rose around 40 percent.

Physical trading was lacklustre in Singapore, a centre for bullion trading in Southeast Asia, with jewellers reporting a slowdown in sales because of rising gold prices.

''It's very difficult. Sometimes, for two or three hours, there are no customers in the shop,'' said J. Rai, a jewellery shop owner.

Premiums for gold bars were unchanged at zero to the spot London price, reflecting slow demand ''Sales have dropped by 50 percent since September last year,'' said Kenny Fan, another shop owner.

''But I've found interesting ways to bring my customers back, like offering them vouchers,'' he said.

At its peak of $604 an ounce, gold has risen more than 16 percent this year, more than 41 percent in the past 12 months, and 100 percent in four years. The metal has also been rallying due to rising oil prices.

BUY SILVER ON PRICE DIPS Though jewellery makers were sidelined, dealers saw limited buying interest from investors as well as renewed investment demand in silver.

''People are crazy about silver. There's some short covering at this level, but I see both buying and selling on gold. It's the speculators who are buying gold,'' said a Singapore dealer.

''Sales of scrap gold have slowed down ahead of holidays in Indonesia and Thailand,'' said the dealer, referring to main consumers in Southeast Asia.

Silver hit a low of $12.47 an ounce before rebounding to $12.75/12.78 an ounce on fund buying. That was higher than $12.62/12.65 late in New York, but was off a 23-year high of $13.01 an ounce hit on Tuesday.

News of an imminent launch of an exchange-traded fund (ETF), which analysts say has the potential to attract 4,000 tonnes or 20 percent of annual output, has lifted the price of silver to multi-year highs.

Platinum rose to $1,089/1,094 an ounce from $1,084/1,088 late in New York. Sister metal palladium also gained to $343/347 from $340/344 ounce.

Precious Metals Prices by 0407 GMT* Last Net Change Pct Move Gold 598.50 5.60 +0.94 Platinum 1089.00 5.00 +0.46 Palladium 343.00 3.00 +0.88 Silver 12.75 0.26 +2.08 Change so far in 2006 Metal Latest bid End prev year Pct Move Gold 598.50 517.20 +15.72 Platinum 1089.00 968.00 +12.50 Palladium 343.00 254.00 +35.04 Silver 12.75 8.81 +44.72 * The closing prices used to calculate the net change may differ from New York's last quoted prices.

($1=118.10 yen) REUTERS PV ND1224