* Gold holds near $1,430/oz on euro debt, Mideast unrest
* Financial markets eye prospect of ECB rate hike this week
* Silver prices extend gains to fresh 31-year high
(Releads, updates prices)
By Jan Harvey
LONDON, April 5 (Reuters) - Gold prices eased on Tuesday
after China raised interest rates for the second time this year,
though euro zone debt concerns and elevated oil prices linked to
violence in the Middle East region limited losses in the metal.
Silver also retreated from the 31-year high of $38.77 it hit
in earlier trade, but traders remain largely on the sidelines
ahead of a key European Central Bank rates decision on Thursday.
Spot gold <XAU=> was bid at $1,431.70 an ounce at 1016 GMT,
against $1,436.55 late in New York on Monday. U.S. gold futures
for April delivery <GCJ1> eased 30 cents to $1,431.90. Silver
<XAG=> meanwhile was at $38.37 against $38.42.
While China's move weighed on prices of both metals, they
remain firmly underpinned by wider issues spooking investors.
"You have (events in) Libya, debt problems in the EU and
concerns about inflation supporting the market," said Ole
Hansen, senior manager at Saxo Bank. "Any changes with these
three factors will affect the market."
"We obviously look at the ECB decision on rate hikes. That's
a bit of a given now," he added. "The market is pricing it in at
this time, and if the ECB doesn't do anything we may see the
dollar strengthen and we may see a bit of a sell-off."
Euro zone sovereign debt was brought back to the fore by a
Moody's downgrade of Portugal, knocking the euro from five-month
highs versus the dollar. Worries over the financial health of a
number of euro zone economies were a key factor in gold's rally
last year. []
Moody's cut Portugal's sovereign debt rating by one notch,
raising concerns that debt problems in the euro zone periphery
may prevent the ECB from raising rates three times this year, as
the market is pricing in. <ECBWATCH> []
Oil prices meanwhile remained near their highest level since
2008 as violence simmered in the Middle East and North Africa,
and as elections in Nigeria were delayed. []
But the financial markets remained cautious ahead of the
ECB's interest rate decision later in the week.
"We won't see much movement until Thursday, when the ECB,
the Bank of England and the Australian bank will announce their
decisions on interest rates," said Mitsubishi analyst Matthew
Turner.
SILVER HITS 31-YEAR HIGH
Silver prices are expected to extend gains after earlier
rising towards $39 an ounce, analysts say, lifted both by rising
investment as buyers seek a safe store of value, and by
expectations that industrial consumption will improve.
The grey metal is widely used in electronics manufacturing,
and in a range of consumer goods such as washing machines,
bandages and socks. []
Silver has outperformed gold in recent months, rising 22
percent in the first quarter compared with gold's 0.7 percent.
The gold:silver ratio, which shows how many silver ounces are
needed to buy an ounce of gold, fell to a 28-year low at 37.3 on
Tuesday.
"Silver continues to attract investor attention away from
gold, and given current sentiment, $40/oz looks inevitable in
the near term," said UBS in a note.
"While there is the real danger that silver prices have
travelled too fast, too soon - for now, investors show no sign
of being overly tempted to sell, with many looking for silver to
chase $50 before that investment decision becomes more
relevant."
Among other precious metals, platinum <XPT=> was at
$1,779.74 an ounce against $1,779.45, while palladium <XPD=> was
at $776.97 against $779.50.
(Additional reporting by Silvia Antonioli; editing by Keiron
Henderson and Alison Birrane)
