Gold hits three-month high ahead of U.S. jobs

By Susan Fenton

LONDON (Reuters) - Gold hit a three-month high on Friday, on track for its strongest weekly gain in a month after growing doubts about whether the Federal Reserve can keep raising interest rates put pressure on the dollar.

The precious metal was up more than 3 percent so far this week as investors awaited the U.S. non-farm payrolls report due at 1330 GMT, which could yield vital clues about the outlook for U.S. monetary policy.

A shaky global economy has lifted buying interest in gold, making it among the best performing assets since the start of 2016 with a gain of around 9 percent.

Other precious metals rode on gold's rally, with silver and platinum also at multi-month highs. Silver is on track for its best week since May last year.

Spot gold was up 0.3 percent at $1,158.3 an ounce by 1055 GMT, after touching $1,158.80, its highest since Oct. 29.

Weaker-than-expected U.S. jobs data could extend gold's rally, while a stronger reading could shift expectations for Fed policy back to rate rises.

"The assessment of Fed policy has changed quite dramatically," said Peter Fertig, a consultant at Quantitative Commodity Research.

"Now the market is assessing whether the Fed might keep rates on hold this year. A stronger-than-expected jobs report could change that and shift market expectations to one to two rate hikes this year, which would be negative for gold."

A Reuters poll forecast non-farm payrolls will rise 190,000 in January, after rising by 292,000 in December.

As a non-interest bearing asset, dollar-denominated gold becomes less attractive if U.S. interest rates rise.

Bullion's upward momentum increased this week after the Fed's William Dudley said there was a need to consider the weakening global outlook in framing U.S. monetary policy.

HSBC analyst James Steel said gold's rally appeared intact.

"We see no compelling reason for more than a normal retracement before bullion resumes an upward move. The rally is underpinned by risk-off sentiment, a weaker dollar and a shift in global monetary policy," Steel said in a note.

U.S. gold for April delivery was up 0.2 percent at $1,159.20 an ounce.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 22.3 million ounces on Thursday, the highest since late October.

Spot silver was up 0.1 percent at $14.86 an ounce, still near Thursday's three-month high of $14.91 and has gained 4 percent this week.

Platinum was down 0.4 percent at $904.5 an ounce, not far below a three-month peak, while palladium hit a one-month high at $518.14.

(Additional reporting by Manolo Serapio Jr. in Manila; editing by David Clarke)