LONDON, May 15: Gold steadied on Thursday as oil prices bounced back towards $125 a barrel, encouraging some speculators to put their money into the precious metal as a hedge against inflation.

Platinum struggled to hold above $2,000 an ounce amid signs electricity supply in main producer South Africa was returning to normal after power cuts in January forced mines to shut down operations, sparking supply fears and sending prices to record.

Spot gold was at $866.00/867.00 an ounce, steady from $865.05/866.25 an ounce in late New York on Wednesday when it touched a one-week low of $859.30 on a firmer US dollar.

A combination of profit taking and a recovery in the dollar against other currencies have put pressure on gold since it spiked to a record high of $1,030.80 an ounce on March 17.

But record high oil prices were likely to offer support, and dealers also expected jewellery makers to take advantage of lower prices to stock up again.

The euro jumped to $1.5535, moving away from a two-month low of $1.5284 last week after a surge in German economic growth suggested euro zone economies have held up well in the face of a global slowdown.

In our view, gold’s range and movements are narrowing and it would be a matter of time before we see a much clearer direction in the near term, Philip Futures said in a note.

Judging by this week’s movements so far, the rebound off the $890-$900 resistance could see gold retest the $845-$850 regions, and a break below that level would provide a much clearer downward movement.

The most active June gold futures contract on the COMEX division of the New York Mercantile Exchange added $0.6 to $866.6 an ounce.

Spot platinum hit a low

of $1,988.50 an ounce before bouncing to $2,015/2,025 an ounce, still down from 2,031/2,046 late in New York and was well below a lifetime high of $2,290 on March 4.

Palladium fell to $426.50/434.50 an ounce from $430.50/438.50 in late New York. Silver edged up to $16.61/16.66 an ounce from $16.55/16.61.

—Reuters