LONDON: Gold rose for a third straight session on Thursday due to a softer dollar and equity markets as tensions between Ukraine and Russia ratcheted up, but the metal's rebound could be short lived on prospects of a U.S. interest rate hike.
Gold gained 0.7 percent to $1,291.00 an ounce by 1001 GMT, holding above the 200-day moving average of $1,284 and heading for its first weekly gain in three. The metal has traded in a narrow range in the past few weeks with the spread between the month's highs and lows at just under $50 an ounce, the smallest since August 2009.
"The metal rebounded today, testing the resistance around the $1,290 level because obviously the dollar is a bit softer and there has been some further skirmishes along the Ukraine-Russia border helping see some safe-haven buying," Societe Generale analyst Robin Bhar said.
"Other than that, we don't seem to be able to convincingly exit this $1,270-$1,320 range," he added. "Next week ... we have quite a busy week of data, with non-farm payrolls next week on Friday and before that we have the ECB meeting."
The dollar was flat against a basket of currencies, mostly due to a recovering euro after speculation of an imminent round of quantitative easing by the European Central Bank cooled.
A softer dollar makes dollar-denominated assets like gold cheaper for holders of other currencies.
The metal also benefited from lower European equities and worsening international political tensions after Ukraine accused Russia of launching a new military incursion across its eastern border.
Investors were eyeing U.S. jobs data later on Thursday as the strength of the jobs market is seen as key indicator of what the Federal Reserve's rate action will be in coming months.
Pressure is building within the Fed for officials to move as early as next month to more clearly acknowledge improvements in the U.S. economy and lay the groundwork for the central bank's first interest rate hike in nearly a decade.
Higher interest rates would encourage investors to withdraw money from non-interest-bearing assets such as gold.
PHYSICAL BUYING
On the physical side, the recent fall in gold prices - they hit a two-month low of $1,273.06 which was hit on Aug. 21 - spurred some buying from the jewellery sector, but the quantity was small, dealers said.
"Demand from India, especially for silver, has picked up because of the upcoming festival season. Overall, demand has been good in the last days, but things are quieter today," said a physical dealer in Singapore.
Premiums for gold bars in Singapore remained steady at 80 cents to $1 an ounce to spot London prices.
Spot silver rose 1.7 percent to $19.74 an ounce, rebounding from a two-month low of $19.25 hit last week.
"Silver is outperforming on the basis that as gold doesn't manage to breach resistance, maybe a better way to position yourself would be in silver," Bhar said.
Spot platinum rose 0.7 percent to $1,419.80 an ounce, while spot palladium was up 0.4 percent at $892.72 an ounce.
The world's second-biggest platinum producer Impala Platinum posted a 74 percent drop in full-year earnings on Thursday after most of its South African operations were hit by a five-month wage strike and said it was reviewing options to restore profit.
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