Spot gold is generally subdued Tuesday but analysts saidinvestors are set to return to the market in the coming days as they shuncredit risk.

As of 1030 GMT, spot gold was trading at $656.15 a troy ounce, down 0.7% from Monday's high.

Liquidation has significantly cut long positions in gold over the pastseveral days as concerns over the subprime mortgages market spread throughoutthe broader financial complex.

This, along with the compulsion for investors to avoid any risk, is expectedto sustain further buying in the coming days, analysts said. Add to thisincreasing physical demand from consumers in India in particular, and gold'soutlook is all the more bullish, they added.

"A combination of positioning, signs from the physical market and growingconcerns about the implications of the credit crunch leave gold very wellpositioned," said UBS analyst John Reade.

"In this environment we believe there is a meaningful chance that gold willattract the safe haven bid that has been so far mostly absent during the creditcrunch," he added.

Anecdotal evidence from the physical market suggests demand from Asia isespecially strong right now, which is unusual given the time of year.

One factor that could disrupt gold's attempt to move higher gold isinvestment in exchange traded funds, or ETFs. Brokers said redemption requestshave started to be made as investors seek fast access to cash, and if thiscontinues, it may be bearish going forward.

The immediate outlook is less certain, and opinions remain mixed as to wheregold prices will move later in Tuesday's session. Although most analysts saidthe market's fundamentals look intact, the consensual view was that the metalmight .

Kitco Bullion Dealers' Jon Nadler said if the credit problem-driven stockmarket slide resumes, then gold could move sharply in either direction.According to Nadler, market participants are "highly skeptical" that the U.S.Federal Reserve discount rate cut "has done anything but give people a chanceto have a weekend respite."

"The uninitiated (to gold) might be better off by sitting on the sidelinesuntil the immediate uncertainty in all markets lifts sufficiently enough toallow for clearer perspectives," Nadler said.

Platinum meanwhile was lower despite news of a strike at the operations ofSouth African producer Lonmin PLC (LMI.LN). Brokers said the strike had beenpriced into the market as it was expected given the backdrop of industrialaction in the country over the last few weeks. As of 1030 GMT, spot platinumwas trading at $1,239/oz, down 0.8% from Monday's high.

Palladium was similarly down as pressure from fund players and weakeningfundamentals continued to weigh on prices. Analysts said $300/oz is nowtargeted, with the spot prices at $325/oz as of 1030 GMT, down 2% from Monday'shigh.

Little upside is expected either for silver in the near-term, traders said,with investors sitting on the sidelines and favoring a reduction in net longs,if anything. As of 1030 GMT spot silver was trading down 3% from Monday's highat $11.62/oz.

-By Andrea Hotter, Dow Jones Newswires