Narrowing bid/offer spreads, easier lease rates and lower options volatilities all pointed to a market more at ease with itself than of late but dealers said appearances were deceptive.

Fresh news of miner hedging difficulties or pressure to close out loss-making positions could be enough to spark a rally while signs of sliding prices might trigger producer sales.

"It could all change in a heart beat if there's a close out or any other big news," a London dealer said.

"The lower the price goes the more likely it becomes that those miners who bought back their hedges on the way up will start selling again," he added.

London gold fixed at $303.25 a troy ounce in the morning, little changed from Thursday afternoon's $302.85.

Gold broke through $300 to two-year highs near $340 in recent weeks after a September 26 pledge by 15 European central banks to limit sales, lending and derivatives activities for the next five years.

The rapid move came amid rocketing gold lease rates and options volatilities which turned some derivatives positions into huge loss makers and exposed the likes of Ghana's Ashanti Goldfields Co Ltd and Canada's mid-sized gold miner Cambior Inc to margin calls on liabilities.

Next Wednesday's expiery in monthly over-the-counter options might see the market swinging rapidly either way.

"It could be fairly explosive," one London dealer said.

Options writers who granted calls when gold languished at 20-year lows mid-year had had to buy gold against those positions as prices rallied to $340.

Options give holders the right but not the obligation to trade gold at agreed future prices and dates, a right for which they pay writers a premium.

Spot gold was last steady at $302.50/$303.25 compared with New York's Thursday close at $303.00/$306.00.

Platinum was higher at $428.00/$433.00 versus New York's $423.70/$428.70 close as lease rates remained tight.

Silver was a cent down on its close, trading at $5.20/$5.23 while palladium was unchanged at $383.00/$385.00.