* Mideast unrest, soft dollar, euro zone nerves lift prices
* Prices head for quarterly gain, but smallest since Q3 2008
* Markets fret over U.S. monetary policy ahead of jobs data
(Updates prices)
By Jan Harvey
LONDON, March 31 (Reuters) - Gold rose in Europe on
Thursday, rebounding after the previous session's late price
retreat, as dollar weakness, concern over euro zone sovereign
debt and unrest across the Middle East supported buying.
The metal is on track for a tenth consecutive quarter of
gains, also supported by low interest rates and high liquidity
in the wake of a raft of quantitative easing programmes.
But its quarterly rise is set to be its smallest since the
third quarter of 2008, before the financial crisis took hold, as
investors fret over the prospect of monetary tightening in the
United States and the euro zone.
Spot gold <XAU=> was bid at $1,431.70 an ounce at 1203 GMT,
against $1,423.38 late in New York on Wednesday. U.S. gold
futures for April delivery <GCJ1> rose $9.40 to $1,433.20.
"Until we see a substantial decrease in liquidity or a rise
in real interest rates, you would look for an upward trend, and
all these other factors like the euro zone debt and Middle East,
North Africa issues are also a short-term support," said
Standard Bank analyst Walter de Wet.
But he said while the bank still expects to see gold prices
above $1,500 an ounce, this is unlikely to happen before the
third quarter.
"We're unlikely to see massive new inflows into gold at the
moment because people are uncertain about what the Fed's going
to do," he said. "We are pretty certain they are not going to
change interest rates for the next three quarters at least, but
they may start reducing the balance sheet."
Investors are awaiting a report on U.S. non-farm payrolls
for March due Friday, considered a key indicator of the health
of the U.S. economy. Forecasts suggest the economy recorded a
second month of solid job growth this month. []
Signs the U.S. jobs market is recovering could support calls
from some Fed officials to wind up the central bank's monetary
easing programme earlier than expected.
"The gold market is caught on one hand between geopolitical
risks and inflation-hedge and sovereign risk buying, and on the
other hand by growing expectations that QE2 will wind down and
monetary policy will be tightened," said HSBC in a note.
DOLLAR SLIPS
The dollar fell 0.5 percent against a basket of major
currencies on Thursday. A weaker dollar makes assets priced in
the U.S. currency cheaper for other currency holders. []
The euro <EUR=> was up 0.7 percent on anticipation of a rate
hike from the European Central Bank next month, but rating
agency Moody's warned further sovereign ratings downgrades for
euro zone countries cannot be ruled out. []
Concerns over euro zone sovereign debt were a major factor
in last year's 30 percent gold price rise.
Oil prices also climbed, with Brent crude futures <LCOc1>
heading for their biggest quarterly gain in almost two years as
violence swept across the Middle East and North Africa. []
Libyan rebels massed for a counter-attack against Muammar
Gaddafi's forces, both buoyed by and wary of news of covert U.S.
support and his foreign minister's defection. []
On the supply side of the market, China's leading mined gold
producer, Zijin Mining, said it expects gold prices to rise
above $1,500 an ounce by year end, and said it plans to produce
62.57 tonnes of gold this year. []
Among other precious metals, silver <XAG=> was bid at $37.71
an ounce against $37.44. Silver is on track to rise 22 percent
this quarter, benefiting from gains in gold and expectations
that industrial demand for the metal will improve.
The gold:silver ratio dropped to its lowest since 1983 on
Thursday at 37.8 as silver outperformed gold.
Platinum <XPT=> was at $1,773.75 an ounce against $1,765.85,
while palladium <XPD=> was at $761.50 against $751.78.
(Reporting by Jan Harvey; editing by Keiron Henderson)
