LONDON -- Gold jumped more than 2 percent on Thursday as investor buying picked up while oil surged and the dollar weakened against the euro, boosting the metal's appeal as an alternative investment and as an inflation hedge.

Gold's gains pushed up other precious metals, with platinum rising more than 2 percent. Silver and palladium also advanced.

Spot gold hit a high of $887.50 an ounce, up 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 U.S. dollar.

"The market seems to have ended it consolidation phase after sustaining above the $860 level," said Pradeep Unni, analyst at Vision Commodities Services in Dubai.

"Although further gains would be needed to erase the bearish tone, selling seems to have momentarily ended. As long as $860 holds, the bulls are safe."

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But gold was still more than $100 away from a record high of $1,030.80 an ounce hit on March 17, and dealers expected jewellery makers to take advantage of lower prices to stock up again.

"This is a perfect opportunity for them to be restocking because the gold price could very easily get back above the $900 territory, and gold can do that in a very short space of time," said Nick Moore, metals analyst at ABN AMRO.

"I think the high gold price clearly had very significant impact on jewellery off-take. I think the direction, looking ahead, will be driven partly by what's happening with oil."

Oil gained to trade above $125 a barrel on Thursday, boosted partly by weakness in the dollar against the euro.

The euro firmed to $1.5504 after strong euro zone growth in the first quarter. The dollar was also undermined by data showing a rise in U.S. weekly jobless claims and a net outflow of capital in March.

The most active June gold futures contract on the COMEX division of the New York Mercantile Exchange rose $14.7, or 1.7 percent, to $881.2 an ounce.

Spot platinum hit a low of $1,988.50 an ounce but then jumped as high as $2,079 an ounce to track a rally in gold.

The metal was last quoted at 2,031/2,046 late in New York, and held below a lifetime high of $2,290 an ounce on March 4.

But platinum may be vulnerable to a correction amid signs electricity supply in main producer South Africa was returning to normal after power cuts in January forced mines to shut down operations.

The mining disruptions have sparked supply fears and sent prices to record.

"The power situation doesn't seem to be quite as bad as it was earlier of the year. Eskom is indicating that there's more power available than previously thought," said Moore.

State-owned power utility Eskom warned South Africans on Wednesday to expect more power outages but said disruptions would likely be minor. Mines are now operating at 90 to 95 percent of their normal electricity supply.

Palladium rose to $431.00.50/439.50 an ounce from $430.50/438.50 in late New York. Silver firmed to $16.86/16.91 an ounce from $16.55/16.61.

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