Gold firmed in Europe on Thursday as a strong recovery in equity markets cut selling of the precious metal to cover losses elsewhere, and as physical buyers took advantage of lower prices to stock up.

Spot gold was up 0.7 percent at $1,651.49 an ounce at 0910 GMT, extending the previous session's 1 percent gains. Trade is expected to be choppy ahead of a policy meeting and press conference from the European Central Bank later.

Concerns over the outlook for the euro zone, as the bloc wrestles with its stubborn debt crisis, were a key factor pushing gold to a record $1,920.30 an ounce last month.

It is extremely hard to see where the solution will come from, said VM Group analyst Carl Firman. I think (the euro zone authorities) will be forced into a solution, but the volatility is based around whether it will be sufficient, or another stop-gap.

We need to see some more definitive news, and in the meantime, we will have a hell of a lot of volatility across the markets, he said.

Gold saw its biggest decline in nearly three years last month as pressurised selling to cover heavy stock market losses pulled prices more than 20 percent from record highs and prompted a period of intense volatility.

European equities extended the previous day's strong gains on Thursday on hopes officials will succeed in their efforts to support Europe's financial sector, while data raised optimism the U.S. economy might avoid slipping into recession.

The euro rose against the dollar and German government bonds fell on optimism over Europe's efforts to aid the financial sector, ahead of the ECB meeting.

ECB President Jean-Claude Trichet is expected to prepare the ground for a pre-Christmas interest rate cut at his final policy meeting and offer banks further protection against the euro zone's worsening debt storm.

The ECB will publish their... rate decision with siren calls for immediate rate cuts ringing in their ears, said CMC Markets analyst Michael Hewson. It seems likely that these analysts could well end up being disappointed.

Despite the folly of the ECB in raising interest rates twice this year... it remains unlikely that Trichet, in his last press conference as ECB head will acquiesce to the markets' expectations, he added.

It is more likely that the ECB will extend the unlimited liquidity measures to banks, while in his press conference he could well give clues about the prospects of a rate cut in the November meeting,... Mario Draghi's first as ECB president.

U.S. gold futures for December delivery were up $12.80 an ounce at $1,654.40.

VENEZUELA REPATRIATES GOLD

Venezuela's central bank chief said the country will begin repatriating its gold reserves from Western nations by mid-November. President Hugo Chavez announced in August that the nation would bring home almost all its $11 billion in gold reserves held abroad.

Elsewhere, London clearing house LCH.Clearnet said on Thursday it will accept gold bullion as collateral by the end of this month, subject to regulatory approval.

Among other commodities, oil climbed more than $1 a barrel and base metals rose strongly as stock markets rebounded.

Other precious metals rebounded, with silver rising 3.1 percent to $31.33 an ounce. Spot platinum was up 1.2 percent at $1,502.99 an ounce, while spot palladium was up 3.9 percent at $592.72 an ounce.

While Chinese appetite for gold appears to be little affected by the holidays, platinum interest out of China has been sorely lacking, said UBS in a note on Thursday.

The lack of physical purchases could not have come at a worst time, given the heaviness across industrial metals and among risk assets in general, it added.

This has aggravated platinum's widening discount to gold, the platinum:gold ratio falling to fresh multi-decade lows mostly under 0.90 over the past couple of days. This trend is likely to continue given the lack of clear drivers that could spur PGM demand in the near term.

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