* Fed's Dudley warns of tighter financial conditions
* Gold made biggest daily gain in two weeks on Wednesday
* Top gold ETF holdings at three-month high
* Coming up: U.S. weekly jobless claims at 1330 GMT
(Updates prices throughout)
By Susan Fenton
LONDON, Feb 4 (Reuters) - Gold built on the previous day's
gains on Thursday, edging to a three-month high as global
economic and financial headwinds continue to present obstacles
to a U.S. interest rate rise 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, its highest
since Oct. 30, before stabilising. It was up 0.2 percent at
$1,145.23 by 1224 GMT, having risen 1.2 percent on Wednesday for
its biggest daily gain since Jan. 20.
Dudley's comments and weaker than expected U.S. services
sector data added to market expectations that the Federal
Reserve is unlikely to lift rates again in March and raised
doubts over the potetntial for increases later in the year.
Rising U.S. rates make a non-yielding assets 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," Natixis analyst Bernard Dahdah
said, adding that he expects the metal to trade around current
levels in the next two months.
Gold has now gained nearly 8 percent since the start of the
year as global economic uncertainty has led to volatility in
financial markets and pushed investors towards safer assets.
Investor focus is turning to Friday's non-farm payrolls and
INTL FCStone analyst Edward Meir said a weak outcome could
sustain the dollar sell-off.
"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," Meir said.
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 0.5 percent at
$1,146.50 an ounce.
Holdings of the 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 $14.75 an ounce,
not far below Wednesday's three-month peak of $14.80.
Spot platinum XPT= rose 0.8 percent to $886.35 an ounce,
having touched a one-month high of $889.87, while palladium
XPD= fell 0.5 percent to $506.95 after hitiing a one-month
peak of $515.54 on Wednesday.