PRECIOUS-Gold rises as lower prices tempt buyers

(Updates prices, adds comment)

* Gold bar premiums surge as lower prices tempt buyers

* Euro zone debt crisis still supporting bullion prices

* Platinum trades at $100/oz discount to gold

By Jan Harvey

LONDON, Sept 28 (Reuters) - Gold prices firmed on Wednesday, continuing the previous session's consolidation after Monday's heavy losses, as price-sensitive physical buyers bought into the market at lower prices, and as assets seen as higher risk retreated.

Spot gold was up 0.4 percent at $1,655.99 an ounce at 1334 GMT. It has steadied in a $40 trading range since early Tuesday after hitting a near three-month low the day before.

"We have a situation very similar to 2008, in that there has been fear of a global recession which has pushed commodity prices down, and as investors had to take profits to cover losses in other assets, gold came down," said Peter Fertig, an analyst at Quantitative Commodity Research.

"But after the collapse of Lehman Brothers, there was a turnaround, and more demand for gold," he said. "Now we have (also) had a recovery in gold... There are still worries about the global economy."

Monday's dramatic $120 price drop has washed out some less committed investors from the market, analysts said, while its resilience at lower levels has fuelled tentative confidence that higher prices can be sustained.

Analysts who study charts of past price movements said gold had found support from a long-term moving average.

"We reached the 200-day moving average, which should now be the line in the sand," said Saxo Bank senior manager Ole Hansen. "The only worry is obviously how burnt investors have become of this 20 percent correction, as something which was perceived to be safe suddenly was not any more."

"The downside may need to be tested and rejected one more time in order to give bulls enough confidence to re-enter," he added. "Strong physical demand should helped the market to find support relatively soon."

Gold bar premiums in India, the world's biggest bullion consumer, hit their highest in more than a year, to top $2 an ounce, after prices fell from the record highs, three importers and a supplier said on Wednesday.

Premiums for gold bars elsewhere in Asia jumped to their highest level since at least February after a drop in prices spurred buying from jewellers and speculators, leading to tight supply, according to dealers.

Volumes on the Shanghai Gold Exchange hit levels not seen since the Lunar New Year in January, UBS said in a note.

"Directional buyers with a long-term horizon have been active in the market," it said. "Such demand and physical buying will do a lot to help gold rebuild its reputation after the recent ugly selloff."

U.S. gold futures GCv1 for December delivery were up $5.50 an ounce at $1,658.00.

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Asset returns in 2011: r.reuters.com/suz52s

Gold correlation with dollar: r.reuters.com/ryx52s

Inflation adjusted gold price: r.reuters.com/pun62s

Gold in different currencies: r.reuters.com/wun62s

Gold/silver ratio: r.reuters.com/xyx52s

Gold/platinum ratio: link.reuters.com/xez92s

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BROAD SUPPORT

Stock markets fell back into the red on Wednesday as investors digested mixed U.S. data, boosting gold's appeal as an alternative asset. It is still being broadly supported by concerns over the euro zone's stubborn debt crisis.

Greece faced a new test in its attempt to avoid bankruptcy as auditors visited Athens on Wednesday. Germany suggested its bailout may be renegotiated amid talks over whether private creditors should take bigger losses.

While gold's price rout early this week has shaken its reputation as a safe haven, it remains attractive as a store of value compared with other assets, analysts said.

"If the euro zone's efforts to remedy the sovereign debt crisis falter, gold could still rally even if riskier assets sell off," said HSBC.

"Much would depend on if the financial markets become sufficiently rattled that investors turn back to bullion as a safe haven rather than trade it as a surrogate currency."

Gold traded at an unprecedented $100 premium to platinum on Wednesday as risk aversion weighed on industrial precious metals while supporting bullion. More than half of platinum demand comes from industry.

Spot platinum was down 0.3 percent at $1,554.49 an ounce, while palladium was flat at $642.97 an ounce. Silver was down 0.4 percent at $31.72 an ounce.

Silver prices have seen their second major retreat of the year this month, falling 23 percent so far in September. (Reporting by Jan Harvey; Editing by Alison Birrane; Editing by Anthony Barker)