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LONDON, June 16 (Reuters) Gold prices jumped more than three percent on Friday on follow-through buying after a strong recovery in U.S.

trade, with dollar weakness and firm oil underpinning the market.

Gold remained under threat and may slip, as people were not yet convinced the recent downtrend is over, analysts said.

''I suspect a lot of this is being driven by short-covering.

I am concerned about people who had bought gold at higher levels and now are shocked by the speed of the move down ... That's going to limit the upside in gold in the near term,'' John Reade, analyst at UBS Investment Bank, said.

''It's vulnerable to any deterioration in sentiment towards global asset markets. The world does look a calmer and happier place, but that could change very quickly.'' Gold rose as high as $585.00 an ounce before easing to $581.25/582.25 by 0950 GMT, against $566.50/$567.50 in late New York on Thursday, when it jumped as much as three percent.

Traders bought back gold to adjust their positions ahead of the weekend after a brutal sell-off this week, when the metal plunged about 11 percent from above $610 an ounce at the start of the week to a three-month low of $543 on Wednesday.

Gold has rebounded as a recovery in global share prices lifted confidence of investors, who earlier in the week exited commodities to avoid risks.

Britain's top share index surged for the second session in a row, led by resources stocks such as miners Antofagasta and Rio Tinto.

A weaker dollar and firm oil prices also lifted gold, as traders turned to the metal, which is viewed as an alternative investment to dollar and a hedge against inflation.

The dollar edged further away from this week's seven-week highs against the euro and yen, while oil climbed back above $70 a barrel, rising for a third day.

''Dollar-related buying has been the main theme this morning,'' said James Moore, analyst at TheBullionDesk.com.

''However the metal still remains at risk of further probes lower as nervous investors switch their money between currencies, commodities and treasuries,'' he said in a note.

In other precious metals, silver advanced to $10.25/$10.35 an ounce from $10.00/10.10 late in New York.

Platinum fell to $1,155/1,161 an ounce from $1,160/1,170, while palladium rose to $302/307, compared with $295/$300 in the U.S. market.

REUTERS CS DS1635