By Frank Tang and Clara Denina
NEW YORK/LONDON (Reuters) - Gold rose 1 percent on Thursday as the dollar fell sharply against the yen and the euro on fears of disappointing U.S. jobs data the next day.
After trading mostly flat, gold suddenly turned higher at midday in New York as investors sold long positions on the greenback - or bets that the U.S. currency will rise - ahead of Friday's all-important U.S. nonfarm payrolls numbers.
Gold has been under pressure recently on a resurgent dollar driven by expectations that upbeat data would prompt the U.S. Federal Reserve to taper its $85-billion-per-month bond-buying program.
Worries over an overbought U.S. equities market also prompted investors to buy more gold, analysts said.
"We are starting to see investors being nervous about holding equities at these levels going forward, so you are going to see money flow back into the safe-haven markets," said Tom Power, senior commodities trader at futures brokerage R.J. O'Brien.
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Spot gold climbed 0.8 percent to $1,414.35 an ounce by 2:38 p.m. EDT (1838 GMT), off a three-week high at $1,423.16 set earlier in the session.
U.S. Comex gold futures for August delivery settled up $17.30 at $1,415.80 an ounce, with trading volume about 25 percent below its 30-day average, preliminary Reuters data showed.
The number of Americans filing new claims for unemployment benefits fell last week, pointing to moderate job growth despite slowing economic activity.
U.S. economic data has been in the spotlight since Fed Chairman Ben Bernanke said last month the central bank would taper off monetary stimulus if the U.S. housing and job markets showed continued strengthening.
Economists forecast U.S. job growth probably picked up only slightly in May, suggesting the economy is still in a rut and not ready for the Fed to dial back monetary support.
INDIA IMPORTS EYED
Gold failed to extend gains, partly pressured by worries over physical demand after the Indian government raised import tax on the metal for the second time this year, to 8 percent on Wednesday.
The appetite for U.S. American Eagle gold and silver bullion coins is still unprecedentedly high almost two months after a historic selloff in gold unleashed years of pent-up demand from retail investors, the head of the U.S. Mint said.
Holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund, held steady on Wednesday after falling 0.3 percent in the previous session. Holdings are hovering near four-year lows.
The performance of gold ETFs should recover given brisk sales of physical bullion products, said Nicolas Berge, a trader at Geneva-based hedge fund Absolute Capital Group, which invests in commodities futures and currencies.
Among other precious metals, silver gained 0.6 percent to $22.65 an ounce, platinum climbed 0.9 percent to $1,524 an ounce, and palladium rose 0.3 percent to $757.72 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by James Jukwey, Keiron Henderson, Gunna Dickson and Dale Hudson)