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Gold rises as oil rallies; volatility declining

* Gold rises toward $940 as oil rises, dollar turns lower

* Gold options indicate futures volatility on decline

* China Communist Party think-tank says buy gold, sell dlr (Recasts, updates with quotes, closing prices, adds NEW YORK to dateline)

NEW YORK/LONDON, (Reuters) – Gold futures rose toward $940 an ounce Thursday, as a weaker dollar and oil’s strong gains prompted investors to pour into the bullion market.

However, the gold options market indicated that bullion prices could continue to gyrate in a broad range as the market was looking for trading cues from outside of the commodities sectors.

Mihir Dange, a COMEX floor trader in New York, said that option investors have been aggressively selling volatilities, and that dampened option prices as gold futures failed to break out of a broad range between $923 and $944 in the past ten days

The resurgent dollar and easing inflation worries have sent gold prices reeling from a three-month high near $990 an ounce in early June.

“When inflation is a concern – it must be at some point when you are putting this much money into the economy, definitely gold should get interesting again,” Dange said…read more at the Forbes