Gold prices recovered some of the ground lost yesterday as bargain hunters and physical buyers came into the market.

But sentiment remained subdued in early afternoon London trading as the dollar held on to recent gains.

Spot gold was quoted at 611.80-612.50 an ounce, while spot silver was quoted at 11.19-11.29 usd. Platinum was down at 1,193-1,199 usd, while palladium fell to 315.50-321-50 usd.

Gold prices had fallen yesterday to around 603 usd an ounce, their lowest level since mid-April, as the dollar gained on what were judged rather dovish comments from the European Central Bank rates meeting, and oil prices tumbled on news of Zarqawi's death.

Spot gold is currently more than 100 usd below its 26-year-high of 730 usd an ounce hit on May 12 this year.

And base metals continued yesterday's weakness, with LME copper for three month delivery down 1.46 pct to 7,350 usd a tonne while three-month zinc fell 2.15 pct at 3,410 usd.

LME three month lead and nickel fell 1.66 pct at 1,010 usd a tonne and 4.31 pct at 20,000 usd, respectively.

The narrower-than-expected US trade deficit announced today seems set to nudge the dollar higher, according to analysts, which is likely to further dampen sentiment on gold. The dollar has been bolstered by a combination of factors ranging from expectations of higher interest rates in the US to falling risk appetites for emerging markets.

A series of hawkish comments from US rate setters this week, including from Fed chief Ben Bernanke, have driven expectations of a quarter point rate hike from the Fed on June 29.

At the same time, the fallout in emerging markets as well as commodities also helped underpin the dollar.

The G8 finance ministers meeting this weekend is predicted to reiterate concerns about global imbalances, in turn lending the US trade data added importance.