TOKYO (Reuters) - Gold inched up on Thursday after failing to maintain $1,000 per ounce the previous day, with investors focussed on the dollar as further weakness in the greenback is likely to benefit the precious metal.
Gold had topped the psychologically important $1,000 level for a second straight session on Wednesday before retreating to a low of $986.95.
But worries about the dollar's deterioration amid growing risk appetite and diversification fears over the traditional reserve currency continued to support the allure of gold as an alternative asset, traders said.
"A decline in the dollar is the biggest key to understand gold's current strength," said Tetsu Emori, a fund manager at Astomax Co, a top commodities trading adviser.
"In these days, the trend in gold is largely set by financial experts, not commodities experts. Their eyes are focussed on the dollar now," he said.
Spot gold traded at $992.60 per ounce as of 4:07 a.m. British time, up 0.2 percent from New York's notional close of $991.15.
It had risen as high as $1,007.45 on Tuesday, its highest since March 2008.
The dollar was little changed after hitting its lowest level in nearly a year against a basket of major currencies <.DXY> on Wednesday, when growing evidence of a global recovery spurred investors to move into riskier currency trades.
U.S. gold futures for December delivery fell 0.3 percent to $994.40 per ounce.
On Wednesday the contract fell $2.70 to $997.10 on the COMEX division of the New York Mercantile Exchange. December gold futures had risen as high as $1,009.70, their highest since February, on Tuesday.
Despite a rally in gold prices earlier this week, there were no new investment inflows into the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, this week, spurring some disappointments. High prices have already contained jewellery demand.
The holdings stood at 1,077.63 tonnes as of September 9, unchanged since Friday.
"When looking back, the run-up was a bit overdone as there has been little real money flowing into gold. The holdings of the ETF didn't change at all," said Naomi Suzuki, a senior analyst at SC Asset Management Co.
"On the rise is open interest of U.S. gold futures only," she said, referring to the number of open positions, which often reflects the appetite of short-term investors.
Unless there is a bounce to a new record in the near future, a fall towards $970 is possible as a rise in the volatility of gold prices in the recent weeks increased the likelihood of a halfway retreat from a $50 jump so far this month, Suzuki said.
Gold stood slightly below $950 at the end of August.
In other metals, platinum was little changed after gold-led gains helped send the white metal to a 12-month high of $1,295 an ounce on Wednesday.
Platinum, mainly used to clean vehicle exhaust fumes and to make jewellery, was at $1,275, versus New York's notional close of $1,276.
