* Gold, silver rally to highest since June on risk aversion
* Dollar recovery pulls prices from highs
* Implats says some striking workers return to work
(Releads, updates prices)
By Jan Harvey
LONDON, Sept 3 (Reuters) - Gold rallied to a three-month
peak in Europe on Thursday amid caution ahead of key U.S.
non-farm payrolls data on Friday, but eased from highs as the
dollar steadied after U.S. ISM services numbers knocked stocks.
Spot gold <XAU=> hit a high of $987.30 and was bid at
$983.05 an ounce at 1448 GMT, against $976.60 an ounce late in
New York on Wednesday.
Fears U.S. payrolls data may disappoint sparked a flight to
quality among investors on Wednesday. The metal broke out of its
previous $930-$960 range as a move through technical resistance
above $960 sparked a rally.
VTB Capital analyst Andrey Kryuchenkov said gold's immediate
move had been largely technical, with the dollar offering little
support and physical demand weakening as prices rose.
Gold will need to hold its current levels to build a base
for further gains, he said. "If we close above $980 we will
retest $990, and probably stay in this range," he said.
The dollar index <.DXY>, which measures the U.S. unit's
performance against a basket of six major currencies, softened
early on Thursday, boosting interest in the metal as an
alternative asset and driving prices to fresh highs. []
But gold has slipped as the index pared losses, with U.S.
stocks falling into negative territory after data showed the
U.S. services sector shrank again in August. []
The market is awaiting fresh clues on the economic outlook
from Friday's payrolls numbers. Investors were spooked after a
labour market report released on Wednesday showed more private
sector job losses than expected. []
The data will be closely watched for its impact on the
dollar, and its subsequent effect on gold. The metal is set to
benefit from renewed demand if the U.S. currency slips further.
STRONG INVESTMENT
"Investment demand for gold is still very strong, and that
is going to help drive the price higher over time," said Helen
Henton, head of commodities at Standard Chartered.
"We think it's going to break $1,000 by Q4, mainly driven by
a weakening U.S. dollar."
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange rose $6.50 to
$985.00. Silver <XAG=> tracked gold higher to reach its highest
since June at $15.82, and was later at $15.71 against $15.34.
It outpaced base metals such as copper, with which silver,
as an industrial as well as an investment metal, often moves.
"Silver has fully participated in this (rally) and yet while
base metals have picked up a bit in the last 18 hours, they were
definitely on the defensive," said Stephen Briggs, an analyst at
RBS Global Banking & Markets.
"Silver has managed to ignore that, which is interesting."
Among other precious metals, platinum <XPT=> was at $1,236
an ounce against $1,229, while palladium <XPD=> was at $289.50
against $284.50.
Impala Platinum <XPT=>, the world's second largest miner of
the metal, said on Thursday some workers at its operations had
returned to work after a strike, but said no wage deal had been
agreed with the union. []
(Additional reporting by Jane Grieve; Editing by Sue Thomas)
