Precious metals cut losses towards the close of Wednesday trading in Europe, with bargain hunting buying attracted by early declines, traders said.
"The market over-reacted in the early decline - it has had a good bounce, and oil is up as well," a trader said.
Earlier, the Federal Reserve's move to hike rates prompted selling and dragged down gold and silver by nearly one percent each.
But price dips are providing good buying opportunities and the metals are seen moving towards recent highs after some profit-booking, analysts said.
Spot gold fell as low $560 an ounce before rising to close at $565.40/566.30 in Europe at 1515 GMT, against $564.35/565.20 late in New York on Tuesday.
"We see potential for further downside pressure over the near term, but the market generally appears well supported at the moment. So any weakness is unlikely to be very violent or major," said Yingxi Yu, analyst at Barclays Capital.
"Trading patterns are telling us that there is buying interest in the market. I see upside potential in the medium term," she said.
The dollar steadied on Wednesday, keeping broad gains made the previous day after the Federal Reserve raised interest rates and signalled another increase was likely.
Higher interest rates can be negative for precious metals as investors often shift to instruments such as fixed-income securities offering higher returns.
Tokyo Commodity Exchange gold futures also came under pressure as Japanese investors locked in profits ahead of book closings on Friday for the end of Japan's financial year.
"Backed by firm oil prices, falls in gold will be limited," said Hiroyuki Kikukawa, an associate director at Nihon Unicom Corp.
The Fed's decision to hike interest rates dragged down other markets, with key base metals falling from their recent highs.
In industry news, Barrick Gold Corp, the world's largest gold company, said it was maintaining its previous forecast to produce between 8.6 million and 8.9 million ounces of gold in 2006.
Silver fell to $10.74 an ounce before finishing at $10.86/10.89 an ounce, compared with $10.84/10.87 in New York. It remained near this week's 22-year high of $10.92 on chances a proposed exchange-traded fund (ETF) will boost demand.
The US Securities and Exchange Commission appeared to clear the way last week for final approval of the first ETF, proposed by Barclays Global Investors.
"The price continues to fall shy of the magical $11 level but with the continued hype surrounding Barclays silver exchange-traded fund, it would appear it's only a matter of time before the $11 resistance level is broken," Standard Bank said.
Platinum was at $1,065/1,069 an ounce from $1,069/1,073 in the US market, while palladium closed at $330/334 an ounce from $337/342.
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