PRECIOUS-Gold steady as dollar and oil eyed, ETF unchanged

* Sideway stocks, currencies dampen gold buy incentives

* SPDR gold ETF holdings XAUEXT-NYS-TT unchanged

By Chikako Mogi

TOKYO, June 11 (Reuters) - Gold prices steadied on Thursday
as investors kept their eyes on oil to gauge inflation risks and
moves in the dollar, which can determine whether they need to
hedge against the value of dollar-denominated assets.

Gold has benefited as a hedge against inflation and the
falling value of dollar-denominated assets as oil prices rallied
on optimism about the economy, fanning fears about future
inflation, while the dollar has also been pressured by concerns
about a ballooning U.S. budget deficit.

But with stocks and currency markets generally confined to
narrow ranges, gold has been struggling to test the key $1,000
level last hit in February, facing physical demand selling and
profit-taking on rises in the market.

"Gold lacks a decisive factor to break out of a recent range,
while some money may be shifted from gold to the oil market,
which is clearly in a rising trend," said Shuji Sugata, a manager
at Mitsubishi Corp Futures & Securities in Tokyo.

Spot gold XAU= inched up 0.1 percent to $954.65 as of 0305
GMT from New York's notional close of $953.65 per ounce.

U.S. gold futures for August delivery GCQ9 were also up 0.1
percent at $956.10 per ounce, compared with $954.70 an ounce on
the COMEX division of the New York Mercantile Exchange.

Traders said gold will likely be supported near $940, a
recent low when prices fell from a high near $990 hit last week,
but stay below $965, where the rebound from the recent low was
capped.

The dollar rose broadly on Wednesday as an auction of $19
billion in 10-year Treasury notes eased some investor fears about
the United States' ability to sell long-term debt to help finance
a ballooning budget deficit.

But the auction pushed interest rates higher, and that
combined with concerns over the gaping U.S. trade and budget
deficits gave financial markets new reasons to worry that massive
government spending and Federal Reserve cash infusions will lead
to inflation, undercutting any fledgling U.S. rebound.

The oil market remained bullish on prospects for the economy,
however, and oil prices, helped also by falling inventories,
surged to a seven-month high near $72 a barrel CLc1 on
Wednesday.

"Investors seem to see the rise in interest rates positively
now as a sign of an economic recovery, compared to earlier this
month when they saw it negatively as a reflection of inflationary
pressures resulting from massive bond issuances to help the
economy," Sugata said.

While investors switch back and forth their interpretations
of developments in financial markets, many are still wary of the
risk of upcoming data undermining the current optimism and
turning sentiment around, traders said.

"That feeling of uncertainty is providing underlying support
to gold, as seen in steady holdings of gold ETFs," Sugata said.

The world's largest gold-backed exchange-traded fund, the
SPDRmyold Trust (GLD: Quote, Profile, Research), said its holdings were steady at 1,132.15
tonnes as of June 10, unchanged from the previous business day.

PRICES

Precious metals prices at 0305 GMT
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 954.70 1.05 +0.11 8.47
Spot Silver 15.23 0.08 +0.53 34.54
Spot Platinum 1255.00 -6.00 -0.48 34.66
Spot Palladium 256.00 3.00 +1.19 38.75
TOCOM Gold 3022.00 -4.00 -0.13 17.45 22505
TOCOM Platinum 3970.00 11.00 +0.28 49.70 11330
TOCOM Silver 477.80 -0.30 -0.06 49.64 187
TOCOM Palladium 815.00 5.00 +0.62 48.18 204
Euro/Dollar 1.4030
Dollar/Yen 98.00
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Michael Watson)