Gold slipped nearly one percent in late European business on Wednesday after climbing closer to a seven-week high, as a rise in the dollar and weaker oil prices prompted investors to take profits.

But sentiment remained positive and dealers said the metal had potential to breach a key level at $650 an ounce in the coming days, which might lift prices of other precious metals to new highs.

Platinum rose to its highest in two months before falling, silver eased after a six-week high and palladium matched Tuesday's peak of $348, its highest in four months.

"The sentiment in the market is still very positive and physical gold activity should be sound below $640. There is great potential to try again to break the $650 level," Frederic Panizzutti, precious metals analyst at MKS Finance, said.

"We are trading in a wide range of $630-$650. The market around these levels are pretty unstable but we believe that we are in a bull trend."

Spot gold hit a high of $647.10 an ounce before declining as low as $640.50. It was quoted at $641.30/642.30 by 1427 GMT, against $646.00/647.00 in New York late on Tuesday, when it rose touched $647.50 -- the highest since Dec 5.