By Arpan Mukherjee Of DOW JONES NEWSWIRES WELLINGTON (Dow Jones)--Gold reversed overnight loses and edged higher in the Asian session Friday, moving in line with a higher euro amid thin trading volumes, but analysts said they expect the yellow metal to be confined to a narrow range during the last few days of 2011. At 0537 GMT, spot gold was at $1,611.80 a troy ounce, up $6.40 from its previous close. "We are likely to see gold tracking the direction of U.S. dollar and developments in Europe," said UOB KayHian senior analyst Helen Lau who expects strong support at $1,600/oz. She said that though gold's near-term outlook "appeared bumpy," the long-term bullish outlook was intact. According to USA Gold economist Peter Grant, while gold moving back above the 200-day moving average this week was seen as encouraging, "the inability of the yellow metal to close above the average leaves the technical picture somewhat questionable." However, Grant noted that the fundamental picture remained "broadly constructive" and everything that has driven gold higher over the past decade is still in place and expanding. In China, demand for gold has slowed as investors become more price sensitive than five months ago, though the country remained positive towards the metal, ANZ Senior Metals Strategist Nicholas Trevethan said in a note. "There is no doubt that the gold fever that existed on the mainland has cooled somewhat," Trevethan said, adding that there were no queues outside gold dealers in the city, whereas back in August people were queuing up to buy gold. But the underlying trend is still in favour of gold, he said. While Chinese investors' appetite for property remained strong, recent restrictions and regulations meant cash that would have otherwise gone into real estate was instead moving towards gold. The common man in Hong Kong seems to prefer jewelry, he said. "Talking to people in the dumpling shops, security guards, taxi drivers and so on - they preferred to buy gold chains and pendants rather than bars and coins," Trevethan added. In other precious metals, spot silver was at $29.25/oz at 0537 GMT, up 12 cents, while platinum and palladium were both up $4 each at $1,423/oz, and $654/oz. Palladium, which has outperformed some of the other precious metals in the complex, has gained about 5.5% this week. -By Arpan Mukherjee, Dow Jones Newswires; 64-4-471-5990; arpan.mukherjee@dowjones.com

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