LONDON, Jan 19: Gold prices rebounded on Thursday after falling to a one-week low earlier in Asia as Japanese interest revived and sentiment remained positive, dealers said. Choppy sessions were seen ahead as a move towards this week’s 25-year peak might make gold vulnerable to corrections while physical demand was likely to resurface at lower prices.

The gold market has seen some massive swings and volatility has been very dangerous. However, profit-taking has always been followed by a very quick rally, a dealer in London said.

Typically in a bull market, negative news is ignored and positive news encourages more buying. The funds like it, the funds are making money and I think funds will continue to invest in gold, he said. Spot gold rose to $546.60/$547.40 an ounce by 1056 GMT after dropping to $540. It closed at $543.60/$544.40 late in New York on Wednesday, when it fell nearly $10 as investors locked in profits from this week’s high of $564.

The good thing is that the $540/$541 support level held because we also had quite a nice move higher in the Nikkei overnight. We didn’t see the potential selling out of Japan, said Alan Williamson.

Tokyo gold futures gained after falling more than 2 per cent on Wednesday as funds covered short positions with a rebound in Japanese stocks. The Nikkei share average rose 2.31 per cent, its biggest one-day percentage gain in three months.

A Reuters poll of 28 analysts and senior traders this week showed on Tuesday an average gold price of $525 in 2006, up 18 per cent from $445.05 last year. The metal was seen gaining further to an average $550 in 2007.

Another poll of more than two dozen participants, conducted by the London Bullion Market Association, predicts an average price this year at $534.94, while Deutsche Bank sees average gold price at $570 an ounce in 2006.

We may now see gold enter a period of consolidation with the market ranging between technical support of $542 and resistance at $562 with $550 developing into a pivotal technical and psychological level, Standard Bank said in a report.

In other precious metal markets, silver edged up to $8.87/$8.90 an ounce from $8.80/$8.83 late in New York.

Platinum rose to $1,036/$1,040 an ounce from $1,023/$1,027 late in New York but it remained below the all-time high of $1,049 hit this week. Palladium rose to $271/$274 an ounce from $269/$273.—Reuters