SINGAPORE, Feb 27 Gold moved back and forth on Tuesday but was within sight of its highes

SINGAPORE, Feb 27 (Reuters) Gold moved back and forth on Tuesday but was within sight of its highest level in nine months as traders braced themselves for the metal's charge towards $700 -- a level last seen in May 2006.

Spot gold hit an intraday high of $687.10 an ounce and slipped to $685.30/686.00 by 0327 GMT, hardly changed from $686.10/686.80 an ounce late in New York.

Gold rallied to $689 an ounce on Monday as firm crude oil, tensions between Iran and the United Nations and a softer dollar sparked safe-haven buying. The metal hit a 26-year high of $730 an ounce in mid-May, 2006.

''Despite hovering in the overbought conditions for quite a while, gold may probe higher levels as new buyers would enter the long side of the trade to take advantage of a breakout,'' said Pradeep Unni, an analyst at Vision Commodities Services DMCC in Dubai.

''Short-term trend analysis does not rule out profit-taking, upon which $678 and $671 would serve as supports,'' he said.

Gold's 14-day relative strength index (RSI) rose above 70 on Monday as the metal hit a new high. It stood at 70.41 on Tuesday. The market views an RSI of 30 or less as oversold and 70 or more as overbought.

The prospect of central banks diversifying out of U.S.

dollars to other currencies and commodities also supported gold, said dealers.

A survey of 47 central banks published by London-based Central Banking Publications on Monday showed almost nine out of 10 central banks see ample scope for further currency and asset diversification of foreign exchange reserves. Silver eased to $14.66/14.71 an ounce from $14.67/14.72 an ounce late New York and off Monday's nine-month high of $14.72 an ounce.

Many dealers were bullish on gold, which has risen around 13 percent since hitting a low of $601.70 in early January, but worries about a build-up in long positions in New York's COMEX market lingered.

''The latest CFTC report shows there has been a significant build-up of new long positions in the last couple of weeks seen in the overall longs and increase in open interest,'' Investec Australia said in a report.

''Whilst this euphoria lasts all is well, but we feel the market could see a significant correction if these factors start to dissipate,'' it said.

The Commodity Futures Trading Commission said in its Commitment of Traders report on Friday that non-commercial players in U.S. gold -- basically speculators -- were net long 129,933 contracts in the week to Feb. 20, compared with 124,750 previously.

Open interest rose to 396,115 lots from 383,169.

The new benchmark gold futures on the Tokyo Commodity Exchange, February 2008, fell 18 yen per gram to 2,680 yen ($22.19), having hit 2,702 yen on Monday, its highest since Sept. 1985.

''The market looks overbought as recent rises have been a bit too rapid. Short-term players, who are keen to lock in their profits, are doing so now,'' said Akira Doi, director at Daiichi Commodities Co. Ltd.

''All the focus is on whether cash gold could touch $700.

Sentiment for commodities as a whole is strong as funds are shifting broadly into oil and copper,'' he said.

U.S. crude steadied above $61 on Tuesday after a four-day gain supported by a cold snap in the United States, gradually tightening supplies due to OPEC's export curbs and long-standing concerns over Iran's nuclear programme.

Concerns about Iran propelled the euro to $1.3205 on electronic trading platform EBS for the first time since early January.

Platinum fell to $1,231/1,236 an ounce from $1,235/1,240 an ounce in New York on Monday, when it rose to $1,245 an ounce -- its best level since late November.

Palladium slipped to $352/357 from $353.50/357.50 an ounce.

($1=120.76 yen) REUTERS CS DS1053