London gold fixed at $305.50 a troy ounce in the morning, down from Wednesday afternoon's $307, its lowest since October 1, when it was surging higher from $270.

"It's pretty dull, trading at $305.50/$306.50 the entire morning," one London dealer said.

"There's some light physical demand for the first time in ages," he added.Gold rocketed from $270 on September 27 after a pledge by 15 European central banks to limit sales, lending and derivatives activities for the next five years.

The accord allayed bearish fears of central bank gold sales in addition to those planned by Britain and Switzerland.

Prices broke $300 on the way to two-year highs near $340 on October 5, as short-term lease rates ballooned to 10 per cent and options volatilities more than tripled to 50 per cent.

Lease rates eased across all dates on Thursday, with one-month metal priced at 1.75 per cent versus Wednesday's 2.20 with similar percentage point falls elsewhere.

"There's lending coming into the longer dates as well," another London dealer said.

"Normally we would consider that as bearish, but it could be indicative of producer buybacks," he added.

Some of the miners that sold forward amid gold price bearishness have reversed those positions since the rally, helping to add fuel to the short-covering rally.

"It's possible we could see dips to $295 and on the upside as high as $315," the dealer added.

Easier gold helps AshantiEvery dollar off spot gold prices eased the pressure on Ghanaian miner Ashanti Goldfields Co, which faced a fresh showdown on Thursday with the 17 derivatives counterparties entitled to margin calls on its loss-making hedge book.

Ashanti got into trouble when soaring gold prices flipped its previously profitable hedge book into deficit, exposing it both to margin calls and a takeover bid by 32 per cent stakeholder Lonmin Plc.

The Ghanaian government, which holds a 20 per cent stake and a veto vote in Africa's third largest gold producer, said that it needed three more weeks to mull Lonmin's bid.

Spot gold was last at $304.50/$305.50 versus New York's close of $305.30/$307.30 while silver was unchanged at $5.17/$5.21.Platinum was down $1.10 down at $424.00/$429.00 and palladium was down $1.90 at $384.00/$389.00.