* Violence continues to simmer in Libya, lifting gold
* Mkt digests implications of possible euro zone rate hike
* Main silver ETF holdings hit highest since early January
(Updates prices)
By Jan Harvey
LONDON, March 4 (Reuters) - Gold held steady on Friday ahead
of key U.S. payrolls data, having arrested the previous
session's slide as unrest in North Africa supported demand for
the metal as a haven from risk.
Spot gold <XAU=> was bid at $1,416.49 an ounce at 1224 GMT,
against $1,415.59 late in New York on Thursday. U.S. gold
futures for April delivery <GCJ1> rose 70 cents to $1,417.10.
Gold fixed at $1,418.00 an ounce at 1030 GMT.
The payrolls report, due at 1330 GMT, is likely to show that
U.S. non-farm payrolls soared in February after being held down
by extreme winter weather in the previous month. Employment is
expected to have increased by 185,000. []
"U.S. nonfarm payrolls data is expected to show a strong
increase in new jobs and this will place the United States back
on the growth phase, at least (in) the labour market," said
Pradeep Unni, senior manager at Richcomm Global Services.
"Bullion may drop due to the strength in dollar, but high
oil prices and current tensions in Middle East are two factors
that are probably curbing... an aggressive drop."
The metal hit a record $1,440.10 an ounce on Wednesday as
violence flared in Libya after weeks of unrest across the Middle
East region, but fell the following day as the European Central
Bank hinted interest rates may rise as early as next month.
Low interest rates have been a major driver of gold prices
in recent years, as they reduce the opportunity cost of holding
non-yielding gold.
"However, prices should be supported by the weakening of the
U.S. dollar versus the euro expected to result from (a rise in
euro zone rates), as the U.S. Fed is still not making any moves
to tighten its monetary policy," Commerzbank said in a note.
Gold's fall has been arrested as violence raged in North
Africa. Libyan rebels vowing "victory or death" advanced towards
a major oil terminal on Friday, calling for foreign air strikes
to set up a "no-fly" zone after three days of attacks by Muammar
Gaddafi's warplanes.[]
VOLATILE
Protests across the region pushed gold up 6 percent last
month on fears violence would spread. While the situation
remains volatile, gold is unlikely to correct significantly.
As well as benefiting from the turmoil in its own right as a
safe store of value, gold has also ridden higher on oil's
coat-tails, after crude prices surged to 2-1/2 year highs above
$100 a barrel last week. []
Gold is sometimes seen as a hedge against oil-led inflation.
Even if oil prices correct, inflation will remain a worry,
analysts said.
"The recent increase in inflation concerns, particularly in
emerging markets, goes beyond the oil market and the current
events in the Middle East and North Africa," said Bank of
America-Merrill Lynch.
"The response of key central banks to rising inflation
expectations will ultimately determine whether gold continues to
track oil over the next few months," it added.
Interest in investment products like gold-backed
exchange-traded funds slackened, meanwhile. Holdings of the
world's largest, New York's SPDR Gold Trust <GLD>, fell to their
lowest since mid-May on Thursday at 1,210.621 tonnes. []
Holdings in the world's largest silver ETF, the iShares
Silver Trust <SLV>, rose to 10,794.89 tonnes by March 3, their
highest since early January. []
Spot silver <XAG=> was bid at $34.40 an ounce against
$34.17. Among other precious metals, platinum <XPT=> was at
$1,821.83 an ounce against $1,823.49, while palladium <XPD=> was
at $803.47 against $812.
(Reporting by Jan Harvey; Editing by Alison Birrane)
