* Weak dollar supports bullion in quiet pre-Easter trade
* Platinum, palladium hit multi-month highs
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, April 9 (Reuters) - Gold edged higher in Europe on Thursday as the dollar weakened a touch versus the euro, but trading was muted ahead of the Easter break.
Platinum and palladium both rose to multi-month highs, however, as investment demand was boosted by talk of new exchange-traded funds backed by the platinum group metals.
Spot gold <XAU=> rose to $882.85/883.85 an ounce at 0935 GMT from $879.55 late in New York on Wednesday. Platinum <XPT=> rose to a 6-1/2 month high of $1,210 an ounce, and was later at $1,199.50/1,209.50 against $1,174.50.
Palladium touched a peak of $234.50 an ounce, its highest since late September, and was later at $232.50/237.50 an ounce against $230.50.
"I don't think we will see a great deal of action on gold," said Commerzbank analyst Eugen Weinberg. "The market was driven by fear, so if there is not so much fear in the market investors will not be looking for as much gold."
The metal is being supported, however, by a slightly softer dollar, which is boosting the metal's appeal as an alternative to the U.S. currency. [
]Platinum and palladium are benefiting from strong investment flows, as buyers hope demand will rise in the second half of the year, he said.
"Demand for new cars at the moment is not increasing, but that means there is greater potential for increases going forward," Weinberg said. "There is anticipation of greater demand in the second half of the year."
Investors are also seeking out the metal for the same reasons they are attracted to gold, he added. "Platinum is a hard asset, and given the possible inflation risks in the future, people are interested in diversifying into assets like that."
TRUSTS
The platinum group metals have been boosted this week by news that ETF Securities has filed with the Securities & Exchange Commission to register platinum and palladium trusts in the United States. [
]"It is clear that many market participants have positioned themselves ahead of a potential platinum ETF product," said one London-based analyst.
"Platinum (and palladium) is currently on the receiving end of the most enthusiastic investor reception that it has seen for many months, and participants are happy to operate in defiance of the recent pressure that gold has succumbed to."
Any platinum-backed ETF is likely to face opposition in the United States from carmakers, analysts say, who may object to the industrial metal being stockpiled by investors.
However, given the current problems in the U.S. auto sector, any such fund is likely to face less opposition than it would have previously, they add. Carmakers are the biggest industrial users of platinum, which is used in catalytic converters.
Holdings of the world's largest gold-backed ETF, New York's SPDR Gold Trust <GLD>, were unchanged on Wednesday for the fourth straight session, raising fears investor demand for the precious metal may be stagnating. [
]Jewellery buyers in India, the largest gold market, are also staying away as they anticipate lower prices. [
]On the supply side, South Africa, the world's number three gold producer, said its output of the precious metal was up 2.7 percent in February from a year before. [
]Among other precious metals, spot silver <XAG=> was little changed at $12.27/12.34 an ounce from $12.25. (Editing by Sue Thomas)