PRECIOUS-Gold up 2 pct to 3-week high after U.S. jobs data

* Dollar pares gains but holds firm vs basket of currencies
* U.S. non-farm payrolls stronger than expected
* Spot palladium rallies 7.1 percent

(Updates paragraph 1 and prices; adds comment, second byline,
NEW YORK dateline)
By Clara Denina and Marcy Nicholson
NEW YORK/LONDON, Dec 4 (Reuters) - Gold rose more than 2
percent to the highest in nearly three weeks on Friday after a
U.S. non-farm payrolls report, seen as likely to pave the way
for the U.S. Federal Reserve to raise interest rates this month,
failed to aid the dollar's ascent.
Non-farm payrolls increased 211,000 in November, the Labor
Department said. September and October data was revised to show
35,000 more jobs than previously reported.
"The second consecutive strong jobs report only briefly
blunted the gold rally as renewed euro strength and U.S. dollar
weakness has driven further short covering in gold," said Tai
Wong, director of base and precious metals trading for BMO
Capital Markets in New York, adding this was despite the fact
that a December rate hike was now more or less guaranteed.
Spot gold XAU= , weaker initially, rose as much as 2.5
percent to its highest since Nov. 16 at $1,088.70 an ounce and
was up 2 percent at $1,082.96 an ounce by 2:24 p.m. EST (1924
GMT). It was on track for a 2.3 percent gain for the week,
following six weeks lower.
"I'm not sure today's news was so surprising but more
confirming," said Rob Haworth, senior investment strategist for
U.S. Bank Wealth management in Seattle, adding that it led some
holding short positions to book profits.
The dollar .DXY pared gains after the payrolls report and
news that sources said OPEC countries had decided to increase
their output ceiling.
Bullion prices extended Thursday's bounce from a
near-six-year low, buoyed then by monetary easing measures from
the European Central Bank that fell short of expectations.

"Shorts were squeezed ... market got way too carried away
and over positioned shorts," a London trader said.
"There were two contradicting factors today: NFP, OPEC...oil
to zero, gold to the moon."
Brent oil futures LCOc1 lost more than 2 percent, falling
below $43 a barrel. O/R
The main focus for the gold market now remains the Fed's
meeting on Dec. 15-16 when many expect an interest rate
increase, which would be the first in nearly a decade. Higher
rates tend to weigh on non-interest-paying gold by increasing
the opportunity cost of holding it.
Investors have been positioning for such a move by pulling
out of bullion funds. Assets in SPDR Gold Trust, the top
gold-backed exchange-traded fund, are at their lowest since
September 2008. GOL/ETF
Spot palladium XPD= made the biggest gains among precious
metals, surging 7.1 percent to a three-week high at $572.70 an
ounce.
Silver XAG= was up 2.8 percent at $14.47 an ounce and
platinum XPT= gained 4.3 percent to $878.89 an ounce.