Cannot control volume

Hi. I have an iPod touch the 3rd Gen, I think.

Yesterday it went crazy when suddenly the volume control thing went missing (the one that's under the pause/play button). Usually, after I restarted it, it will be okay but it wasn't. It said that I have to connect to iTunes and apparently, have to restore to the factory settings, which I did. After restoration, I noticed that my music player's volume has only two option. It's either loud or muted. Even if I dragged the volume to the loudest of the slowest, the volume was still the same. I tried to restart it but the problem continues. Help please! Thanks!