* CFTC says to review gold, silver position limits
* Gold investors increase buying after CFTC announcement
* Platinum, palladium could divert gold ETF demand-analyst
(Recasts, updates CFTC position limits proposal, closing prices, market activity, add NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Jan 14 (Reuters) - Gold turned higher on Thursday due to the dollar decline and as investors increased buying after the U.S. futures regulator said it would review possible position limits on gold and silver.
The chairman of the Commodity Futures Trading Commission said that the agency's planned meeting in early March to discuss possible position limits on metal futures and options contracts will focus on gold and silver contracts.
Gold futures buying increased in a knee-jerk reaction to avoid possible future measures by the CFTC to rein in speculation in metals trading, dealers said.
The CFTC also unveiled long awaited proposals, as part of the Obama administration's push to overhaul financial markets, to apply to the four most-traded energy contracts on the two major exchanges.
Spot gold was at $1,141.20 an ounce at 2:31 p.m. EST (1931 GMT), against $1,137.60 late in New York on Wednesday.
U.S. gold futures for February delivery on the COMEX division of the NYMEX settled up $6.20 at $1,143 an ounce.
U.S. crude and natural gas futures were little changed at lower levels after the CFTC proposed to limit the role of big traders in the volatile energy markets.
A review of possible position limits on the COMEX gold and silver market should not affect prices because of the vast physical spot gold market outside of the United States, traders said.
Meanwhile, the euro cut losses against the dollar, and that provided support to gold.
The common unit initially fell as European Central Bank chief Jean-Claude Trichet highlighted the importance of a strong U.S. currency. Euro late traded nearly unchanged against the dollar.
"The euro-dollar rate is the main driver in the short term," said Calyon analyst Robin Bhar. "Energy markets are also off the boil... so there is a combination of factors at play."
SPDR GOLD TRUST STEADIES
Holdings of the largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, were steady on Wednesday, having declined nearly 18 tonnes since the New Year.
Interest in platinum group metals-backed ETFs could detract attention from similar products backed by gold, like the SPDR fund, Goldman Sachs said in a research note.
"The gold ETFs may face increased competition for investor demand in 2010 from the introduction of both the platinum (PPLT) and palladium (PALL) PGM ETFs," the bank said.
"While these new physical-backed ETFs present a downside risk to gold-ETF demand and gold prices, they represent an upside risk to platinum prices, and we continue to recommend a long position in platinum as a 'gold-plus' trade," it added.
Palladium rose more than 5 percent to an 18-month high on Thursday, boosted by strong investment demand on the back of the launch of the new palladium ETF.
Platinum also climbed nearly 2 percent on speculation the ETFs could reduce the amount of the metals available to the market this year.
Spot palladium hit a peak of $445.50 an ounce and was last at $442.50 an ounce against $421.50. Platinum hit a high of $1,612 an ounce, and was last at $1,607 against $1,574. Silver was at $18.66 an ounce versus $18.59. (Reporting by Frank Tang and Jan Harvey; Editing by Marguerita Choy)