Gold jumpy as buying tapers off, platinum tumbles

SINGAPORE, Nov 14 (Reuters) Gold pared gains in erratic trade on Tuesday, struggling to resist selling pressure at higher levels after last week's rally to a two-month high of around $636 an ounce.

In other precious metals, platinum fell more than 2 percent on the back of fund selling in Japan ahead of the release of a supply and demand report.

The physical sector saw both gold buying and selling from investors and jewellers. But sales from Indonesia, Southeast Asia's main consumer, had subsided, keeping premiums for gold bars steady at around 60 U.S. cents an ounce in Singapore.

''I am bit lost about direction. There's still some interest from India but they are not buying much,'' said a dealer in Singapore, referring to the world's largest consumer.

''People don't talk much about China. I think the market is sceptical if it will be buying gold to boost the reserves. It looks like China is more confident in the euro. Also, the gold price may be too high for them to buy,'' he said.

Spot gold rose as high as $627.10 an ounce before slipping to $622.90/623.90 an ounce by 0741 GMT, lower than $625.20/626.20 an ounce late in New York on Monday, when it had dropped nearly $2.

Gold jumped to its highest in two months of $636.50 on Friday on speculation that China could buy the metal for reserves. China is the world's 10th-largest holder of gold, according to the World Gold Council, with 600 tonnes.

The rally was also spurred by a falling dollar following comments from China's central bank governor the country planned to diversify its estimated $1 trillion in reserves.

Speculation last week, fuelled by Chinese officials over the threat of a wider move out of dollar-based assets by overseas central banks, drove the greenback to multi-month lows against most major currencies.

''General market sentiment still appears to be bullish, although we will not be convinced until $636 an ounce is breached,'' said Darren Heathcote of Investec Australia.

''I still believe that it's the case,'' he said.

Dealers were watching the crude oil market and the dollar for direction. Weaker oil and a stronger dollar sparked profit taking in London and New York on Monday, when the metal had hit an intraday high of $632.40 an ounce.

The euro rose to $1.2826 Against the yen, the dollar dropped to 117.53 yen The benchmark most-distant October gold contract on Tokyo Commodity Exchange ended down 32 yen at 2,379 yen ($20.24), further retreating from the three-month high marked last Friday to reflect declines in New York's COMEX market.

Platinum fell more than 2 percent to hit an intraday low of $1,173 an ounce to track declines in Tokyo. The metal was last quoted at $1,200/1,204 in New York.

Tokyo platinum futures tumbled to finish down by their 100-yen daily limit on selling spurred by speculation that an industry report due out shortly may bring bad news for the market.

Johnson Matthey Plc. is due to release its mid-year demand outlook for platinum at 1300 GMT.

The benchmark most distant October 2007 platinum contract ended at 4,335 yen, down 2.25 percent on the day.

''Platinum has been hit by speculation that the content of the Johnson Matthey report will work as a negative factor for the market,'' a Japanese trader said.

Palladium eased to $319/324 an ounce from $324/328.

Silver fell to $12.77/12.84 an ounce from $12.86/12.93 late in New York.

REUTERS PKS HT1910