* Fed's Dudley warns of tighter financial conditions
* Gold rose the most in 2 weeks on Wednesday
* Top gold ETF holdings also at 3-month high
* Coming up: U.S. weekly jobless claims at 1330 GMT
(Changes dateline to London from Manila, updates throughout)
By Susan Fenton
LONDON, Feb 4 (Reuters) - Gold edged up to a three-month
high on Thursday, a day after its best day in two weeks, buoyed
by expectations that global economic and financial headwinds
could make it tough for the U.S. Federal Reserve to raise rates
in the near term.
Commodities rallied across the board on Wednesday as the
dollar tumbled after William Dudley, president of the Federal
Reserve Bank of New York, said that financial conditions have
tightened considerably and the weakening global outlook could
have "significant consequences" for the U.S. economy.
Spot gold XAU= touched $1,147.40 an ounce on Thursday, its
highest since Oct. 30, before stabilising. It was up 0.2 percent
at $1,145.16 by 0956 GMT, after rallying 1.2 percent on
Wednesday, the biggest daily gain since Jan. 20.
Dudley's comments, and weaker-than-expected U.S. services
sector data, added to market expectations that the Fed was
unlikely to raise interest rates again in March and raised
doubts about rate hikes later in the year.
Rising U.S. rates make a non-yielding asset such as gold
less attractive.
"The (Fed funds futures) now sees only a 12 percent
probability of a rate hike in March so I am not expecting the
price of gold to drop soon," said Bernard Dahdah, an analyst at
Natixis, adding he expected it to trade around current levels in
the next two months.
Gold has now gained nearly 8 percent since the start of this
year as uncertainty about the health of the global economy has
made financial markets volatile, pushing investors into safer
assets.
Investor focus will soon turn to Friday's non-farm payrolls
and INTL FCStone analyst Edward Meir said a weak outcome could
sustain the dollar selloff.
"If we get a stronger-than-expected reading, the pendulum
might swing the other way, as the Fed 'hawks' recover lost
ground in the debate," said Meir.
A Reuters poll forecasts U.S. non-farm payrolls will
increase by 190,000 in January, after rising by 292,000 in
December. ECONUS
U.S. gold for April delivery GCcv1 was up 0.4 percent at
$1,141.30 an ounce.
Holdings of top gold-backed exchange-traded fund, SPDR Gold
Trust GLD , continued to rise, standing at 22.19 million ounces
on Wednesday, the most since late October. GOL/ETF
Spot silver XAG= was up 0.5 percent at $14.757 an ounce,
not far below Wednesday's three-month peak of $14.80.
Spot platinum XPT= hit a one-month high of $889.87 an
ounce, up more than 1 percent, while palladium XPD= was down 1
percent at $504.19 an ounce, after reaching a one-month peak of
$515.54 on Wednesday.