Array

SINGAPORE, May 25 (Reuters) Gold steadied on Thursday after a sharp fall in U.S. trade, although traders were wary of another test lower, while a price dip in platinum attracted some buying by jewellers in China.

Spot gold rose as high as $645.10 an ounce on early buying by Japanese investors. It then eased to $644.40/645.20, but was still up from $639.20/640.00 late in New York on Wednesday.

Gold, used in jewellery and as an investment, dropped nearly 5 percent in U.S. trade as fund selling and profit-taking pushed it further away from its 26-year high of $730 hit on May 12.

''Sentiment turned a bit sour after the big drop overnight. I think it is still likely to test lower in the near term ... possibly try the $630 level,'' said Peter Tse, a dealer at Scotia Mocatta in Hong Kong.

If prices did not stabilise, he said physical buying of gold was unlikely to pick up substantially.

In other precious metals, platinum's fall below $1,300 sparked buying interest from some jewellers in China, which accounts for half of global platinum jewellery demand.

Platinum fell to $1,278/1,285 from $1,280/1,290 an ounce.

Last week it hit a record high of $1,336 an ounce.

''I think the demand is quite steady in China, but there's also a possibility that some jewellers are using old stocks,'' said a dealer in Hong Kong.

Premiums for platinum were steady at $2 an ounce to the spot London price in Hong Kong .

Platinum, mainly used in jewellery and to clean car exhaust emissions, has risen as much as 37 percent this year as investors diversify into precious metals on tension in the Middle East, and worries about rising energy costs and volatile dollar.

Dealers said the sentiment towards the metal remained firm after Johnson Matthey, the world's top platinum distributor, said last week the platinum market was likely to remain in deficit for the eighth year in a row in 2006.

''Precious metals may experience further adjustments next week, but I am still bullish. I am confident the uptrend remains,'' said the Hong Kong dealer.

''I am not worried about the price drop. It's a normal technical adjustment,'' he said.

Palladium fell to $344/351 an ounce from $345/353.

In gold, dealers expected a volatile trade, with declines in Tokyo futures likely to limit gains. Currencies were expected to offer leads for the precious metal.

Benchmark gold futures on the Tokyo Commodity Exchange, currently April 2007, fell 69 yen per gram to 2,379 yen, tracking losses in New York.

Silver edged up $12.51/12.61 an ounce from $12.45/12.55.

Precious Metals Prices by 0404 GMT* Last Net change Pct Move Gold 644.00 1.90 +0.30 Platinum 1278.00 -2.00 -0.16 Palladium 344.00 -1.00 -0.29 Silver 12.51 0.05 +0.40 Change so far in 2006 Metal Latest bid End prev year Pct Move Gold 644.00 517.20 +24.52 Platinum 1278.00 968.00 +32.02 Palladium 344.00 254.00 +35.43 Silver 12.51 8.81 +42.00 * The closing prices used to calculate the net change may differ from New York's last quoted prices.

REUTERS CS ND1118