* Oil, grains rallies, inflation worries underpin gold
* Gold up; dollar fell earlier on expected ECB rate hike
* Silver extends gains to fresh 31-year high
* Coming up: IMF to begin talk of use from gold sales
(Rewrites, updates with comment, market activity, changes
byline/dateline, previously LONDON)
By Frank Tang
NEW YORK, April 4 (Reuters) - Gold pared gains on Monday
but stayed within reach of its record high, as investors
fretted over inflation and dollar weakness against the euro
ahead of an anticipated rate hike by the European Central
Bank.
Silver rose to a 31-year high on strong investment demand,
as the precious metals complex was lifted by worries about
simmering commodities inflation led by oil and grain after an
encouraging U.S. jobs report on Friday.
"Gold's benefiting from rising inflation expectations due
to a strong economy and high oil prices. The ECB rate hike, on
the other hand, keeps the dollar under pressure," said Bart
Melek, head of commodities strategy at TD Bank Financial
Group.
Spot gold <XAU=> rose 0.3 percent to $1,431.30 an ounce by
12:07 p.m. EDT (1607 GMT), off an earlier high of $1,438.55 an
ounce. Bullion hit an all-time high $1,447.40 on March 24.
U.S. gold futures for April delivery <GCJ1> rose 0.3
percent to $1,433.
Silver <XAG=> climbed to its highest in 31 years at $38.58
an ounce, lifted by gold's gains and speculative buying. It was
later up 1.5 percent at $38.31.
Silver's rise sent the gold-to-silver ratio to its lowest
level since 1983 as expectations the economic recovery would
benefit industrial commodities such as silver relative to
gold.
ECB RATE HIKE, DOLLAR STRENGTH EYED
Bullion rose as the the euro initially hit a fresh
five-month peak against the dollar, with the ECB expected to
raise rates by 25 basis points from a record low in reaction to
rising inflationary pressures in the euro zone, with two more
25 basis point hikes factored in by year-end. <ECBWATCH>
[]
The euro later erased gains as traders said an increase in
interest rates was already priced in by investors.
Rising interest rates are generally negative for gold, as
they raise the opportunity cost of holding non-yielding assets,
but a weakening dollar boosts gold and real rates are expected
to remain depressed by rising inflation.
Gold is also benefiting from concerns some smaller euro
zone economies such as Portugal and Ireland will continue to
struggle with sovereign debt, and from unrest in the Middle
East and North Africa.
Rising oil and grain prices also helped support gold's
inflation hedge appeal. U.S. oil rose to a 2-1/2-year highs on
geopolitical risks to supply, while corn futures rallied to the
highest level since the 2008 global food crisis on tight
supplies. [] []
Bullion investors now look for trading cues as the
International Monetary Fund (IMF) member countries begin talks
this week on what to do with the profits from its 403.3 tonnes
gold sales, which were completed in December amid record prices
in bullion. []
For platinum group metals, platinum <XPT=> rose 0.7 percent
to $1,777.50 an ounce, while palladium <XPD=> gained 1.4
percent to $780.50.
Prices at 12:07 p.m. EDT (1607 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCM1> 1433.00 4.10 0.3% 0.8%
US silver <SIK1> 38.355 0.623 1.7% 24.0%
US platinum <PLN1> 1785.00 8.10 0.5% 0.4%
US palladium <PAM1> 783.40 9.05 1.1% -2.5%
Gold <XAU=> 1431.30 3.32 0.2% 0.8%
Silver <XAG=> 38.31 0.57 1.5% 24.1%
Platinum <XPT=> 1777.50 12.50 0.7% 0.6%
Palladium <XPD=> 780.50 10.55 1.4% -2.4%
Gold Fix <XAUFIX=> 1435.50 3.00 0.2% 1.8%
Silver Fix <XAGFIX=> 38.46 83.00 2.2% 25.6%
Platinum Fix <XPTFIX=> 1781.00 2.00 0.1% 2.9%
Palladium Fix <XPDFIX=> 785.00 5.00 0.6% -0.8%
(Additional reporting by Jan Harvey in London)
