By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold edged higher on Friday as Asian shares fell, adding to its biggest quarterly gain in nearly 30 years, though caution prevailed ahead of the U.S. non-farm payrolls report.
Bullion has climbed 1.4 percent so far this week, its best such rise in four weeks, after Federal Reserve Chair Janet Yellen said that the U.S. central bank should proceed only cautiously as it looks to raise interest rates.
Gold is sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets, while boosting the dollar.
However, better-than-expected payrolls data could revive expectations of higher U.S. rates, strengthen the dollar and hurt gold. U.S. payrolls due later on Friday are expected to grow by 205,000, according to a Reuters poll.
Spot gold gained 0.1 percent to $1,233.30 an ounce by 0705 GMT, following a 0.6 percent rise overnight.
"If we start to see macro readings out of the United States pick up a head of steam (with a strong jobs number helping) this could prompt a change in the current thinking that the Fed will remain dovish for a long while," INTL FCStone analyst Edward Meir said in a note.
A robust number could instead revive expectations that an interest rate hike in June is possible, Meir said.
U.S. economic data will remain in focus as investors try to gauge the strength of the economy and its impact on monetary policy.
Data on Thursday showed the number of Americans filing for unemployment benefits unexpectedly rose last week, but a sharp drop in layoffs in March suggested the labour market momentum remained intact.
In the wider markets, a rout in Japanese shares led Asian markets lower on Friday as a gloomy suite of surveys on Japanese manufacturing sparked heavy fund selling and overshadowed upbeat news from China's vast factory sector.
The dollar found some respite on Friday after steep quarterly losses against major rivals, but was not very far from its lowest since mid-October reached on Thursday.
In the physical bullion market, higher gold prices curbed demand for the precious metal in Asia, with premiums in several major markets taking a hit.
India's gold demand in the March quarter is set to drop by about two-thirds from a year ago to its lowest in seven years.
(Reporting by A. Ananthalakshmi; Editing by Christian Schmollinger and Biju Dwarakanath)
