PRECIOUS-Gold firms, eyes best quarter since Q1 2008

* Gold set to rise 7 pct in July-Sept quarter

* Some analysts see rally in Oct on a weakening dollar

By Risa Maeda

TOKYO, Sept 30 (Reuters) - Gold firmed on Wednesday and was
poised to post its best quarterly performance since the first
quarter of 2008, helped by dollar weakness and technical
momentum.

Spot gold XAU= was at $996.30 per ounce at 0358 GMT, up 0.6
percent against the notional close in New York of $990.70,
supported by Wednesday's retreat in the greenback.

U.S. gold futures for December delivery GCZ9 were at
$995.75 per ounce at 0408 GMT, up 0.5 percent.

Bullion is set to rise about 7 percent in the July-September
quarter, its strongest performance since it rose 9.9 percent in
the January-March period of 2008.

It rallied to an 18-month high of $1,023.85 an ounce earlier
this month, just a few dollars shy of the March 2008 record peak
of $1,030.80.

It has since succumbed to profit-taking, with a dollar bounce
from a one-year low marked last week keeping bullion investors
largely on the sidelines.

Market players are awaiting the reaction of currency and
equity markets to U.S. private payrolls data for September due at
1215 GMT. The ADP estimate of private payrolls is viewed as a
sort of preview to the U.S. Labour Deparments' monthly non-farm
payrolls report due this Friday.

Economists polled by Reuters estimated that the ADP national
employment report would show that payrolls shed 210,000 jobs in
September.

"Trading is rangebound. The focus is on the foreign exchange
market and U.S. payrolls data to be released tonight," said Leon
Lee, senior gold trader at Bank of China in Hong Kong.

There is little physical buying demand at current price
levels, Lee said, noting that further consolidation towards $980
per ounce would be needed to spur such buying.

In the currency market, the euro inched up 0.2 percent to
$1.4620 EUR=, having climbed over 4 percent so far in
July-September. [USD/]

The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust (GLD), said its holdings stood at 1,094.107
tonnes on Tuesday, unchanged since Thursday. [GOL/SPDR]

Looking ahead, some analysts said investors would soon resume
buying gold to hedge against a weakening dollar as the U.S.
central bank will likely maintain its easy grip on monetary
policy to support the financial system.

Koichiro Kamei, managing director at Market Strategy
Institute in Tokyo, said a further rally in global equity markets
seems unlikely as prices have factored in most of the bright
spots ahead. Instead, the market focus will shift to banks'
quarterly earnings.

"In October, earnings are likely to show the financial
conditions of banks are far from good enough to fix investor
confidence," Kamei said. "That means the Federal Reserve's easy
policy is unlikely to end any time soon, resulting in a weak
dollar, inflation woes and therefore, a buy for gold," he said.

Underlining vulnerability of the U.S. financial system, the
Federal Deposit Insurance Corp on Tuesday discussed how to
rebuild the bank deposit insurance fund, which has been depleted
by a sharp increase in bank failures.

The FDIC's five-member board proposed that banks repay three
years of fees to help cover the rising cost of bank failures.
[ID:nN29134893]

Precious metals prices at 0400
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 996.00 5.30 +0.53 13.16
Spot Silver 16.29 0.18 +1.12 43.90
Spot Platinum 1276.00 9.00 +0.71 36.91
Spot Palladium 287.00 2.00 +0.70 55.56
TOCOM Gold 2887.00 6.00 +0.21 12.20 27382
TOCOM Platinum 3691.00 -10.00 -0.27 39.18 6422
TOCOM Silver 470.90 2.60 +0.56 47.48 215
TOCOM Palladium 836.00 -4.00 -0.48 52.00 69
Euro/Dollar 1.4618
Dollar/Yen 89.76