By Devika Krishna Kumar and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold edged up on Thursday as the dollar and stock markets retreated, locking in the metal's biggest quarterly gain in nearly 30 years amid reduced expectations for U.S. interest rate hikes.
The metal is highly exposed to rising rates, which lift the opportunity cost of holding non-yielding assets, while boosting the dollar. Gold fell 10 percent last year ahead of the first U.S. rate increase in nearly a decade in December.
Spot gold was up 0.6 percent at $1,232.06 an ounce at by 2:55 p.m. EDT (1855 GMT). U.S. gold futures settled up $7 an ounce at $1,235.60.
The dollar index slipped to a 5-1/2 month low earlier in the session, sending gold up as much as 1.2 percent.
World stocks fell for the first time in four days on Thursday as a roller-coaster quarter drew to a close.
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"Between option expiration that just took place and the changes in market sentiment, you're just seeing steady gold without a major rally even though we had a bit of a rally after the dovish statement from Fed's Yellen," said George Gero, managing director at RBC Wealth Management.
"There are still questions about the economy, the lack of inflation so far and of course, what the traders dislike most - uncertainty, which provide upside support for gold."
The metal rallied late on Tuesday after Federal Reserve Chair Janet Yellen said the U.S. central bank should proceed only cautiously in raising interest rates.
Gold, along with other markets, is now awaiting fresh direction from U.S. non-farm payrolls data on Friday, a closely watched barometer of the health of the U.S. economy. A soft reading would bolster the view that rate hikes are not imminent.
If there is a little bit of weakness in the data on Friday, the market is likely to see another rally, ABN Amro analyst Georgette Boele said.
Gold's 16.2 percent climb in the first three months of this year, its biggest quarterly rise since 1986, was driven by concerns over global growth, which battered equities and sparked a wave of safe-haven buying.
"A combination of safe-haven demand on the back of worries about China in particular, a scaling back of expectations of further rate hikes from the Fed, and rising inflation expectations ... have been behind the rally in the gold price," Capital Economics analyst Simona Gambarini said.
Silver was up 1.5 percent at $15.42 an ounce, while platinum was 1.6 percent higher at $975.22 an ounce after touching a one-week high of $982.99. Palladium was up 0.2 at $562.95 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Alexander Smith, Susan Fenton and Tom Brown)