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SINGAPORE, May 26 (Reuters) Gold edged above $650 an ounce on Friday, lifted by bargain hunters, but dealers said it may try the downside again after losing more than 10 percent in value since hitting a 26-year high two weeks ago.

Dealers were also cautious after the dollar rebounded ahead of key inflation data which could offer clues about whether the Federal Reserve will raise interest rates again in June.

''Recent market volatility has investors on edge, whilst some investors sell off key positions in the indecisive market until a clear direction is evident,'' said NM Rothschild in a report.

''We see that a key downside scenario has a resistance of $625 per ounce with the ability for a sharp upturn,'' it said. Rothschild pegged resistance at $700 an ounce.

Spot gold rose as high as $654.75 an ounce but then retreated to $651.80/652.60 an ounce. The current price level was below the 10-day moving average of about $667 and the 30-day moving average of $661.

Gold was last quoted at $649.80/650.60 late in New York on Thursday, when it added more than 1 percent after the dollar weakened and fund selling subsided.

Dealers expected gold to trade in volatile $$630 to $670 range in the next few days, with currencies likely to offer leads.

Gold surged to its highest level in 26 years at $730 on May 12 as funds and investors poured money into the metal on worries about rising energy costs, tension the Middle East and uncertainty in the dollar's outlook.

Dealers await the release of the U.S. core personal consumption expenditures index -- the inflation index most closely watched by Fed policy makers -- for more clues about whether the Fed hikes rates at its June policy meeting.

Rising interest rates tend to boost the dollar and may reduce gold's allure as an alternative investment.

The euro slipped to $1.2775 from around $1.2800 while the dollar rose to 112.05 yen from around 111.75 yen in late U.S. trade.

The dollar had fallen on Thursday after economic growth data failed to bolster expectations for a rate rise next month.

The U.S. Commerce Department the economy grew at an upwardly revised 5.3 percent annual rate in the first quarter, its fastest in 2-{ years, as companies built up inventories and exports strengthened. But the market had expected to see a 5.7 percent gain.

''There was some bargain hunting but it seems the market faces resistance around $655. I don't see much buying interest on the physical side and it looks like sentiment has not changed to bullish yet,'' said a bullion dealer in Hong Kong.

''For next week, $635 will be the support level and resistance is $670,'' he added.

In Japan, benchmark gold futures on the Tokyo Commodity Exchange, currently April 2007, rose 17 yen per gram to 2,397 yen, reflecting gains in New York. Tokyo gold futures tumbled almost 3 percent on Thursday on fund selling.

Platinum rose to $1,295/1,303 an ounce from $1,287/1,297 late in New York. Sister metal palladium fell to $349/356 an ounce from $350/358.

Silver edged up $12.70/12.80 an ounce from $12.66/12.76.

Precious Metals Prices by 0357 GMT* Last Net change Pct Move Gold 651.80 1.50 +0.23 Platinum 1295.00 8.00 +0.62 Palladium 349.00 -1.00 -0.29 Silver 12.73 0.03 +0.24 Change so far in 2006 Metal Latest bid End prev year Pct Move Gold 651.80 517.20 +26.02 Platinum 1295.00 968.00 +33.78 Palladium 349.00 254.00 +37.40 Silver 12.73 8.81 +44.49 * The closing prices used to calculate the net change may differ from New York's last quoted prices.

REUTERS CS KN1112