Gold was steady near its highest level in more than 10 weeks on Thursday, on inflation fears driven by record high oil, and gains in ETF holdings suggested investors were shifting their money back to bullion.

Gold was at $942.65/943.65 an ounce, steady from $942.60/943.60 an ounce late in New York. Gold rallied to hit a high of $946.50 an ounce on Wednesday, its strongest level since April 17, as fears of rising energy costs spurred buying.

But trading may be slow ahead of US employment data and an interest rate decision by the European Central Bank, which will determine the direction of the U.S. dollar and precious metals.

"I think the market is kind of toppish around here. We are going to see a narrow range trading today," said Ellison Chu, senior manager at Standard Bank London in Hong Kong.

"I think people would like to keep their books square for the long weekend," said Chu, referring to Friday's US Independence Day holiday.

Gold has rebounded around 8 percent since falling to a one-week low at $873.50 last week. The rise above a recent high of $935 also triggered buy signals on charts, but gold was still below a record high of$1,030.80 hit in March.

Gains in ETF holdings suggested investors regained confidence in gold after volatile trade in recent weeks, said Adrian Koh, analyst at Philip Futures in Singapore.

"I think so, judging by how much gold prices have risen in tandem with the rise in gold holdings. I am still looking at the $950-$955 regions for resistance and if we do move above those levels, it's very likely that we could retest the record high."    

Bullion held by SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 658.57 tonnes, the highest level since mid-March, when it hit a record high above 663 tonnes. Oil hit another record above $144 a barrel after a drop in US crude inventories raised supply concerns.

In theory, expensive oil lifts gold's appeal as a hedge against inflation, while a weaker dollar boosts the metal's appeal as an alternative investment. The euro hit a two-month high at $1.5893 after ADP Employer Services said U.S. private-sector employers cut 79,000 jobs in June, the largest drop since November 2002, stirring worries the jobs report on Thursday may also come in weak.

The single currency was also supported by expectations for the European Central Bank to raise rates by 25 basis points to 4.25 percent at a policy meeting.

Gold futures for August delivery on the COMEX division of the New York Mercantile Exchange fell $1.9 an ounce to $944.6. Spot platinum fell to $2,061.50/2,081.50 an ounce from $2,065.50/2,085.50 late in New York. Spot palladium rose to $466.00/472.00 an ounce from $463.00/471.00 an ounce.

Silver edged down to $18.28/18.34 an ounce from $18.32/18.39 late in New York. The most active Tokyo platinum contract for June 2009 delivery on the Tokyo Commodity Exchange ended the morning session 45 yen per gram lower at 6,941 yen.- Reuters