Gold hit a new six-week high on Thursday, supported by firm energy prices and improving physical demand in key consuming nations.

But traders were a bit nervous about chasing prices too actively ahead of an interest rate decision by the European Central Bank (ECB) on Thursday and the release of closely watched U.S. nonfarm payrolls data on Friday.

Gold climbed as far as $685.10 an ounce, the highest since July 24, and was quoted at $683.10/683.70 by 5:57 a.m. EDT, against $681.40/682.00 in New York late on Wednesday. A rise beyond $693.60 will place gold at a 16-month high.

Gold prices continue to be heavily influenced by investor sentiment and movements in foreign exchange rates, said Michael Widmer, director of metals research at Calyon Corporate and Investment bank.

Following the continued problems on the interbank market, which has prompted the ECB to inject substantial amounts of funds into the financial system, today's ECB meeting may give further indications as to how European central bankers see the situation evolving, he said.

The ECB provided emergency funds to turbulent money markets on Thursday, mirroring its Australian counterpart, as the global credit crisis doused expectations for a euro zone rate rise.

Gold has rebounded more than 6 percent since falling to a seven-week low of $641.10 in mid-August, when investors sold gold and other metals for cash to cover margin calls on losses arising from a meltdown in the U.S. subprime mortgage market.

Gold traditionally has been used by investors as protection against economic and political uncertainty. But in recent months it behaved much like other financial assets because of the growing role of commodities in diversified portfolios.

The metal has sprung into action this morning as the good demand seen in Asia has spilled over into early European trade, said James Moore, precious metals analyst at TheBullionDesk.com.

While the rate decisions today and payrolls data tomorrow may trigger some profit taking, gold does seem to have found some momentum of its own this week, suggesting the metal's safe-haven attributes have well and truly kicked in.

Gold was helped by oil prices, which rose above $76 a barrel, closing in on an all-time high, as investors expected U.S. refinery snags and slower imports to drain gasoline and crude stocks in the world's biggest consumer.

Gold is generally seen as a hedge against oil-led inflation and often moves in the opposite direction of the dollar, which steadied against the euro on Thursday.

Gold should be supported as there is plenty of seasonal demand. Many Asian buyers such as from India are showing strong interest, said Akira Doi, director at Daiichi Commodities Co. Ltd. in Tokyo.

In other metals, silver was catching up with gold's gains, rebounding 11 percent since last month's sharp drop as purchases from jewellers and bargain hunters resurfaced.

Silver rose to $12.22/12.26 an ounce from $12.19/12.22 in New York, while palladium advanced to $331/335 an ounce from $329.50/333.50. Platinum rose to a one-month high of $1,278/1,282 an ounce from $1,269.50/1,276.50.

The main factor for the platinum price is still concern about a shortfall this year, caused in part by the buoyant demand for cars expected. We therefore envisage moderate gains over the next few months, Commerzbank said in a daily note.

(Additional reporting by Chikafumi Hodo in Tokyo and Lewa Pardomuan in Singapore)

Inflation Gold