SINGAPORE, Jan 3 Gold hardly moved on Wednesday ahead of the release of key U.S. data and

SINGAPORE, Jan 3 (Reuters) Gold hardly moved on Wednesday ahead of the release of key U.S. data and minutes from the Federal Reserve's December policy meeting, but the metal's rise at the start of the year may encourage more buying.

The physical sector saw little activity, with no signs of purchases from jewellery makers in China ahead of the Lunar Ne w Year celebration in mid-February, said dealers.

Spot gold hit a high of $640.40 an ounce, barely changed from $640.10/641.10 an ounce late in London on Tuesday, when the metal had jumped to its highest in nearly a month at $640.80 on a weaker dollar.

''We are into a new year and the fact that gold is up this high could be sufficient for the funds to buy back into some commodities or buy a little bit more,'' said a dealer in Sydney.

Gold rallied to a 26-year high at $730 on May 12, 2006 on fund buying as energy costs rose, tensions increased in the Middle East and investors worried the dollar would fall in value.

''I think it's going to be a good quarter. There's nothing much to say for today with the Japanese still away for a holiday. But if you ask me where we are going for the year, generally I will play it up,'' said a dealer in Singapore.

''I think $540 will be a key support level. We should be fine as long as we don't break that level and generally people are buoyant.

There's a lot of liquidity around and this points to inflation,'' he said.

The euro was firmer at $1.3283. The market is waiting for the release of the Institute for Supply Management's reading on the U.S. manufacturing sector and the minutes of the Fed's meeting which may help shed some light on the outlook for rates and the dollar.

''With recent market talk suggesting that inflation may be under control again in the U.S., it could have important implications for U.S. interest rates, the dollar and hence gold,'' said Investec Australia in a daily report.

Fed officials have been talking tough on inflation even as the market wagered on rate cuts and dollar bears will be looking for any hint of a softening tone.

A weaker dollar makes gold cheaper for holders of other currencies and lifts bullion demand.

Premiums for gold bars were steady in Singapore at 50 U.S. cents an ounce to the spot London price . Premiums hardly changed at 30 cents an ounce in Hong Kong.

''I think the Chinese have become more price-sensitive. I am not sure when they're going to buy again,'' said a dealer in Singapore.

''But at the current price, I wouldn't be surprised if Indonesia starts selling back gold,'' said the dealer, referring profit taking by holders in Southeast Asia's main consumer.

Silver rose to $13.12/13.19 an ounce from $13.08/13.14 late in London. The metal had risen to its highest in nearly three weeks at $13.18 on Tuesday.

Platinum rose to $1,134/1,139 an ounce from $1,133/1,139. Palladium was unchanged at $333/338 an ounce.

REUTERS CS RK1157