London gold fixed at $320.50 a troy ounce in the morning, up 25 cents from Tuesday afternoon's price of $320.25. Platinum eased overnight, despite gains in yen-based futures in Japan, with technically driven trading capping the upside.

``Gold lease rates and option volatility remain high, suggesting that recent strength in the gold market is likely to be sustained until such time as the initial damage and aftershocks driven by recent official sector announcements have run their course,'' Deutsche Bank said in a daily report.

Options volatilities, which indicate market thinking on price moves, eased towards 30 per cent for one month versus their recent peak of 50 per cent but still treble their usual level.

Bid/offer spreads also eased, with most dealers quoting $1 versus the usual 50 cents, although this was down on the $2 or $3 evident for the last couple of weeks.

Fifteen European central banks pledged last month to limit their gold reserve sales, lending and derivatives activities for five years, putting a rocket under spot prices and gold equities and catching many in the market by surprise after years of bearishness about central banks' attitude towards gold.

Bullion banks, investment funds, miners and even jewellers that had bet on falling prices were hit by gold's reversal from 20-year lows in the $250s to two-year highs near $340.

``It appears to me that the market will see some more pain before we get back to something more balanced,'' director Scotia Mocatta of Bullion Simon Weeks said.

``If we break $325, we look at the mid $340s. If $345 goes, I think we could see the $350/$375 area quite quickly. We are in the lap of the gods after that, depending on what's going on elsewhere,'' he said.

Trading in the shares of Ghana's Ashanti Goldfields Co Ltd was to resume on the London Stock Exchange on Wednesday after a 48-hour suspension since before Monday's announcement that Lonmin Plc had made a conditional offer valuing Ashanti at $840 million.