Gold prices rose on Thursday as investors bought back the metal after a round of profit-taking the previous day when the US currency climbed and oil prices tumbled.
Both spot gold and futures fell about 2 per cent on Wednesday as commodities retreated broadly led by heavy losses in oil, the US dollar's sharp recovery amid weaker US economic indicators and steep losses on Wall Street.
Investors returned to US dollar assets as worries about the outlook for the economy and stock market declines dampened their risk appetite.
The US dollar was steady against the yen and euro on Thursday.
"We are getting a bit of a bounce after the large sell-off yesterday, plus the dollar is a bit weaker after the rally on Wednesday," said Adrian Koh, an analyst at Phillip Futures.
Spot gold rose nearly 0.7 per cent to $US968.50 per ounce from New York's notional close of $US962.15 per ounce. Gold last hit $US1000 on February 20.
US gold futures for August delivery rose 0.4 per cent to $US969.5 per ounce from $US965.60 an ounce on the COMEX division of the New York Mercantile Exchange. It settled down 1.9 per cent on Wednesday, the biggest one-day percentage fall for the August contract since April 6.
Prices are hovering just below $US1000, where selling incentives for customers counter funds buying to hit options triggers that would lift prices above the key four-digit level.
Inflation worries and the US dollar's weakness have supported a bullish view on gold, while bears said short-term funds were driving up the market so any gains would not last long.
"I still think it's possible (to hit $US1000), but the markets are currently at an important crossroads and any further selling pressures could change that," Koh said, noting that if the market could hold above the $US960 level - the low for Wednesday's sell-off - then the $US1000 level was still realistic.
Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, eased 1.53 tonnes to 1132.50 tonnes as of June 3, reflecting investor selling. On June 1, holdings rose to a record 1134.03 tonnes.
Traders said they were watching interest rate decisions later on Thursday by the Bank of England and the European Central Bank.
