Gold ends down but weak dollar, higher oil support

NEW YORK/LONDON (Reuters) - Gold futures ended slightly lower on Thursday but the metal came off the day's lows as the dollar weakened, while rising oil prices also gave the metal a lift as a potential inflation hedge.

While gold futures briefly rose above $1,000 an ounce, some traders expressed disappointment at the market's inability to sustain this week's stunning run to 18-month highs at $1,007.45.

"The resumption of dollar weakness has been supportive. The oil market has also gotten a little succor from the IEA report, and oil helped to stiffen gold," HSBC metals analyst James Steel said.

Gold has found favor as a hedge against the potential for oil-induced inflation, and Steel said while that argument was keeping prices firm, the reality of higher prices may not materialize.

"Those that are buying gold on an inflationary argument may be disappointed, but that could take time to unfold," he added.

U.S. December gold futures settled down 30 cents at $996.80 an ounce on the COMEX division of the New York Mercantile Exchange. The contract hit a session low of $983.20.

Spot gold was at $995.35 an ounce at 2:20 p.m. EDT (1820 GMT), compared with $991.15 late in New York on Wednesday.

Oil rose above $72, supported by a report from the International Energy Agency (IEA) that global demand would be higher than forecast <O/R>.

Gold rallied above $1,000 an ounce for only the third time in history on Tuesday after breaking a number of key technical resistance levels. News that Barrick Gold (ABX.TO)(ABX.N) was cutting its hedgebook of forward gold sales fueled gains.

The dollar index .DXY declined on Thursday after data showed the number of workers filing new claims for jobless benefits fell last week. <FRX/>

The bullion market has relied heavily on dollar weakness for support. A weak U.S. currency boosts interest in gold as an alternative asset, and makes the precious metal cheaper for non-U.S. investors.

Among other precious metals, silver rose to $16.65 from $16.27, platinum was at $1,285.50 against $1,276, while palladium eased to $288 from its previous finish of $290.50.

ETF Securities said holdings of its London palladium-backed exchange-traded fund (PHPD.L) rose 5.5 percent to a record 477,766 ounces, while its gold and silver-backed products also recorded inflows.

(Additional reporting by Veronica Brown in London; Editing by Lisa Shumaker)