LONDON, Sept 7: Gold failed to retain early gains on Thursday but was steady above $630 an ounce as investors were wary of chasing prices higher because of a firm dollar and weak oil prices, traders said.

Silver hovered below its highest in three months while palladium fell about three percent before rallying.

Precious metals have slightly run out of steam, Stephen Briggs, economist at SG Corporate and Investment Banking, said.

We may need to consolidate in the $630 to $640 area for a bit before it (gold) attempts to go up again.

There is too much to lose because so many people have invested so much (in commodities) that everybody is desperate for them to go up. It means that the bias is always going to be upward until there is a big shock, he said.

Gold rose as high as $636 an ounce before dropping to $633.90/634.90, against $633.60/634.60 in New York on Wednesday, when it rose to a four-week high of $640.25.

A rise in the dollar against the euro dampened buying, while a fall in oil prices in recent days also discouraged investors from adding fresh positions, traders said. Gold often moves in the opposite direction to the dollar, while the metal is generally seen as a hedge against inflation.

The dollar was marginally up against the euro, while oil slipped to its lowest in five months before rebounding.

They would have already bought gold in August when the market was trying to come down to $610. There was extra physical buying, said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

In other metals, silver rose as high as $13.11 an ounce and was last quoted at $13.02/13.09, unchanged from late levels in the US market. Prices jumped to a three-month high of $13.22 on Tuesday.

Platinum fell to $1,257/1,262 an ounce from $1,263/1,268, well below a three-month high of $1,270 hit this week, while palladium dropped as low as $344 an ounce before settling at $350/354, versus $355/360 in New York.

In industry news, fire broke out at a gold mine in Russia's Eastern Siberia owned by London-listed Highland Gold Mining, trapping up to 19 workers below ground. The world's fourth-biggest gold producer, Gold Fields Ltd.—Reuters