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LONDON, Sep 28 (Reuters) Gold traded above $600 an ounce for the first time in more than two weeks after a recovery in oil prices sparked buying by investors and restored the metal's role as a hedge against inflation.

But analysts questioned whether gold's jump of $30, or five percent, in a week suggested the metal was on a recovery path after it took a hammering earlier this month.

''I don't think we are in a position to move dramatically higher in the short term. Technically, the market is looking a little bit overdone,'' said Jeremy East, head of trading at Standard Chartered Bank.

''It's been a gradual rise. I am not really convinced that we are making new highs this year,'' he said, adding gold might fall again on any drop in oil prices.

Gold touched $604.25, its highest since Sept. 11, and was at $603.30/604.30 by 1127 GMT, against $599.90/560.90 late in New York on Wednesday.

Gold has tracked movements of oil in recent weeks, falling to a near-three-month low of $571.20 in mid-September. Prices spiked to a 26-year high of $730 an ounce in May.

Oil nudged to a seven-day peak just above $63 a barrel, building on the previous day's $2 rise, but later steadied.

''The yellow metal should be able to hold its current level above $600. Crude is likely to limit an ongoing rally but support should come from a weakening dollar,'' said David Holmes, director of precious metals sales at Dresdner Kleinwort.

PHYSICAL BUYING SUFFERS Physical trade slowed to a trickle as higher prices limited purchases by jewellers, but dealers said seasonal demand from main consumers such as India, China and Japan might help bullion to hold above $600.

''As we set ourselves to enter the fourth quarter, the market will watch closely the physical demand by jewellers, especially in India,'' Investec Australia in Sydney said in a daily report.

Dealers were awaiting more U.S. economic data to assess whether the Federal Reserve's next move would be to cut interest rates. A final reading for second-quarter growth was due on Thursday and a key inflation report on Friday.

The dollar was off marginally against the euro.

In other metals, silver rose to a two-week high of $11.76 an ounce before settling at $11.62/11.72, up from $11.59/11.66 late in New York.

Platinum rose to $1,149/1,154 from $1,135/1,143 an ounce, while palladium increased to $318/323 an ounce from $316/320 in the U.S. market.

In industry news, Turkey's first gold-based Exchange Traded Fund (ETF) started trading on the Istanbul Stock Exchange on Thursday, the manager of the fund said.

Gold production at South Africa's South Deep mine is expected to slide by nearly 60 percent year-on-year in the second half following two accidents, half-owner Western Areas Ltd said.

[ID:nL28426647] REUTERS PKS GC1749