LONDON (Reuters) - Gold inched higher in Europe on Thursday as the weaker dollar lent support, but gains were limited as the currency awaited fresh direction from another U.S. government debt auction later in the session.
Spot gold was bid at $954.60 an ounce at 0929 GMT, against $953.65 an ounce late in New York on Wednesday.
"(Gold) is just tracking the dollar really closely," Citigroup analyst David Thurtell said.
"The dollar is really torn at the moment between the bears who are worried about a lot of supply of U.S. debt coming on to the market, and the bulls who think that the U.S. is going to pull out of the recession earlier and faster than Europe."
"Until that's a bit more certain I think the dollar and gold will just track in a bit of a range," he added. "Gold seems stuck at about the $945 to $965 level."
The dollar fell against a basket of currencies on Thursday, paring some gains made after the benchmark U.S. Treasury yield hit its highest point in eight months the previous day.
Foreign exchange traders are awaiting direction from an auction of 30-year Treasury bonds later in the session, which may lead to a fresh rise in U.S. long-term yields.
Oil edged higher and held close to a near-eight month high above $72 a barrel hit in earlier trade. Rising crude prices can boost buying of gold as an inflation hedge.
Stronger crude prices also indicate interest in commodities as an asset class. A global commodities benchmark, the Reuters/ CRB index .CRB, closed at a seven-month high on Wednesday.
Equities lent little direction, with European shares barely changed as traders stuck to the sidelines ahead of U.S. weekly jobless claims and retail sales numbers due at 1230 GMT.
SOFT DEMAND
Buying by exchange-traded funds was relatively soft, with neither the largest gold ETF, the SPDR Gold Trust, or London's ETF Securities reporting inflows on Wednesday.
Gold buying in the world's largest bullion consumer, India, remained slow on Thursday, with dealers unwilling to make fresh purchases as the wedding season nears its end.
On the supply side, mine output from South Africa fell 13 percent in volume terms in April from a year before, official data showed.
Meanwhile silver was flat at $15.15 an ounce, platinum was at $1,262.50 an ounce against $1,261, and palladium was at $257 against $253.
ETF buying of platinum continued, with ETF Securities reporting another small inflow of just over 3,000 ounces on Wednesday. Holdings of the company's ETFS Physical Platinum fund have risen 42,700 ounces or 14 percent in the last week.
While ETF demand is likely to support the market, price gains could be limited by the chilling effect of this on jewelry buying, one of the only buoyant areas of consumption at a time when industrial demand for the metal is languishing.
"Further platinum price gains could dampen Chinese jewelry demand, which could increase the downside risks, as China is the biggest platinum consumer," Standard Bank said in a note.
