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SINGAPORE, May 19 (Reuters) Gold regained ground on Friday after the metal's drop the previous day ignited buying from investors, but dealers expected volatile trade ahead with the currency market likely to influence direction.

Platinum rose as much as 1.4 percent on fund buying driven by a bullish outlook. But the metal remained below this week's record high of $1,336 an ounce and profit taking in Japanese futures was likely to cap gains.

Spot gold rose to $683.25/684.25 an ounce from $680.30/681.10 late in New York on Thursday, when it dropped more than $10 on speculative selling sparked by volatile financial markets.

Gold surged to a 26-year high of $730 an ounce last week. Its record high was $850 reached in January 1980.

''We view the sell-off of recent days as the start of a correction in a bull market that has further yet to run. Some of the weaker longs have been cleaned out, with only modest damage to the gold price,'' said Commonwealth Bank of Australia.

''Gold should get as low as $650 an ounce before taking out the $800-an-ounce mark around year-end.

''There's plenty of long-term investment money still to come into the market, safe-haven and inflation fears remain, the U.S. dollar is falling and fabricators are low on inventory,'' it said in a monthly report.

The dollar edged up against the yen, erasing earlier losses attributed to strong Japanese growth data, as investors felt the dollar's sell-off in the past month had gone far enough for now.

The dollar was at 111.00 yen after falling as low as 110.43 yen soon after the Japanese data showed gross domestic product grew 0.5 precent in January-March from the previous quarter due to resilient capital spending and domestic demand.

It was little changed at $1.2840 per euro.

Sentiment on the dollar remained weak after U.S. Treasury Secretary John Snow reiterated his dissatisfaction about the pace of China's efforts to increase the flexibility of the yuan.

Snow's comments pushed the dollar down against major currencies as the market took them as a sign that U.S. officials would accept weakness in the dollar to help adjust global imbalances.

Bullion dealers were braced for volatility.

''Take out a coin and toss. Whatever it says just follow it and put stop loss. I will stick to my trading range of $670 to $730 for the moment until proven otherwise,'' said a bullion dealer in Singapore.

''Gold's failure to break through $721 this week seems to suggest that we will try the downside. But it's getting good support at $670,'' he said.

In Japan, benchmark gold futures on the Tokyo Commodity Exchange, currently April 2007, hit a low of 2,448 yen ($22.05) per gram before rebounding to 2,476 yen, up 16 yen from Thursday's close.

''I think overall upside potential remains with volatility in the short term. Gold will continue being influenced by movements in the dollar and the consolidation phase is not over yet,'' said another Singapore dealer.

Platinum rose to $1,317.50/1,325 an ounce from $1,300/1,308 late in New York but was off Wednesday's record high of $1,336.

Johnson Matthey, the world's top platinum distributor, said on Monday demand for the metal was set to outpace supply for the eighth year in a row in 2006.

Sister metal palladium also rose to $365/372 an ounce from $356/361.

Silver edged up to $12.70/12.80 an ounce from $12.56/12.66.

Precious Metals Prices by 0355 GMT* Last Net change Pct Move Gold 683.50 0.90 +0.13 Platinum 1316.00 16.00 +1.23 Palladium 365.00 9.00 +2.53 Silver 12.70 0.02 +0.16 Change so far in 2006 Metal Latest bid End prev year Pct Move Gold 683.50 517.20 +32.15 Platinum 1316.00 968.00 +35.95 Palladium 365.00 254.00 +43.70 Silver 12.70 8.81 +44.15 * The closing prices used to calculate the net change may differ from New York's last quoted prices. ($1=110.99 yen) REUTERS CS PM1111