NEW YORK (Reuters) - Gold rose on Thursday on a combination of rallying crude oil, a decline in the dollar and an inflow into a major exchange-traded fund, with volume capped on caution over Japan's nuclear crisis.
A wave of cross-asset buying lifted gold. Global equity markets rebounded after three days of selling despite Japan, and oil rising more than 3 percent on unrest in the Middle East and North Africa.
"If more uncertainty does play out in the marketplace, we may finally see gold catch fire, and if the dollar continues to fall, I think gold will continue to find support," said Jeffrey Pritchard, analyst at futures broker Altavest.
Sentiment also improved after data showed U.S. consumer prices rose at their fastest pace in more than 1-1/2 years in February, even as most economists agreed inflation pressures remained generally contained.
Spot gold rose 0.3 percent to $1,403 an ounce by 3:29 p.m. EDT (1929 GMT).
U.S. gold futures for April settled up $8.1 at $1,404.2 an ounce. U.S. COMEX trade was more than halved Wednesday's volume and one-third lower than its 30-day average, preliminary Reuters data showed.
Volume is thin as many investors are sidelined on Japan and are waiting on news ahead of a G7 finance minister meeting on Friday, said David Lee, precious metals traders of Heraeus Precious Metals Management.
Spot silver traded in lock-step with gold and later gained 0.4 percent at $34.32 an ounce, with turnover 50 percent lower than Wednesday's.
Gold benefited from a weak dollar as the yen hit a record against the greenback ahead of a conference call by Group of Seven finance ministers on fears that officials may soon intervene to rein in the currency's rapid rise.
GOLD PUT-CALL SKEW
Prices of gold put options were bid over calls, as bullion investors used a strategy combining options and futures to protect against downside risk, floor traders said.
"Since we've had such a big move up recently, investors buy puts and sell calls to lock in what they have," COMEX gold options floor trader Jonathan Jossen said.
Premiums for gold bars rose to as much as $2 an ounce in Tokyo, double from earlier this week, as a record-high yen boosted demand and supply tightened.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings edged up to 1,217.295 tones by March 16 from 1,212.745 tones by March 15, their lowest since May of last year.
Platinum and palladium fell as the market fretted about a loss of demand due to car plant closures in Japan. Platinum and palladium tumbled to 3-1/2-month lows of $1,654 and $684.50 an ounce respectively, before turning higher.
Part of the reason for the recovery in the platinum group metals (PGM) was news on Wednesday that car maker Nissan Motor (7201.T) said it would restart certain operations.
However, other major auto makers, led by the world's No. 1 Toyota Motor Co (7203.T), are still shut and may remain so for some time as they struggled to restart production amid a shortage of parts and workers.
Platinum gained 0.7 percent to $1,697.49 an ounce and palladium rebounded 1.8 percent to $706.98 an ounce.
Prices at 3:28 p.m. EST (1928 GMT).