Gold rises on ECB comments as oil, grains up

Five-tael (6.65 ounces or 190 grams) gold bars are seen at a jewellery store in Hong Kong in this April 21, 2011 illustration photo.

NEW YORK (Reuters) - Gold rose 0.5 percent on Thursday, its biggest one-day gain in two weeks, as crude oil and grain rallied and lingering worries over a European debt crisis boosted bullion buying.

Gold benefited as the European Central Bank kept its interest rate unchanged but signaled a July interest rate rise. The metal is also up nearly 6 percent in the past five weeks on bleak U.S. economic data including a weak jobs report last Friday.

"The fact that the ECB didn't raise interest rates immediately is going to keep gold moving higher," said Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management. "Until there is a resolution of the European crisis, gold is going to be supported."

Spot gold was up 0.5 percent at $1,544.51 an ounce at 3:30 p.m. EDT (1930 GMT). U.S. gold futures for August delivery settled up $4 an ounce at $1,542.70 an ounce, after trading in a range from $1,534 to $1,550.80.

COMEX gold futures volume was below 110,000 lots, almost half its 30-day average. Volume has been lackluster since last week, a period when bullion prices have largely rangebound.

Silver was up 2 percent at $37.52 an ounce.

Inflation worries were spurred by grain prices rising sharply after the U.S. government surprisingly cut its estimate of U.S. corn acreage and as crude oil jumped over 1 percent a day after OPEC kept output quotas unchanged.

Recent sluggish U.S. economic data, including a weak employment report, has boosted expectations that U.S. interest rates will stay at record lows, pressuring the dollar and weighing on benchmark Treasury yields.

The end of a $600 billion U.S. government bond-buyback program this month, or the second round of U.S. quantitative easing dubbed QE2, also fuels economic worries. <US/>

Gold was also lifted as Wall Street rebounded after six days of losses, but analysts said that equity market's bounce could be largely driven by an oversold rally.

The metal was also likely to be underpinned by safe-haven demand in wake of a possible U.S. default or credit rating downgrade.

Top Democratic and Republican lawmakers met on Thursday to discuss taxes and other hurdles to a debt-reduction deal aimed at allowing the United States to keep borrowing money at rock-bottom rates.

EURO ZONE STILL SHAKY

Gold rose as the euro fell against the dollar after the ECB kept its 2012 inflation forecast unchanged, suggesting the pace of euro zone interest rate hikes may be slower than previously thought.

In the medium term, ongoing concern over the financial health of the euro zone is set to support interest in gold as a haven from risk.

Greek bond yields rose on Thursday after European officials said more steps were needed to meet deficit cutting targets, with no clarity over how policymakers intend to resolve the country's debt problems.

The EU, ECB and IMF mission to Greece said in a report obtained by Reuters on Wednesday that more aid for Greece could not be released until it corrected the under-financing in its adjustment program.

UBS investment bank said in a note that gold's rangebound conditions are unlikely to last given the event risk surrounding Greece, the end of QE2 and the potential for an extended economic soft spot.

Platinum group metals were higher despite relatively soft auto sales in China and India, which have been usually rare bright spots in the car sales market last year.

Platinum was up 1 percent at $1,838.49 an ounce. Palladium was up 1.9 percent at $814.55 an ounce.

Prices at 3:30 p.m. EDT (1930 GMT)

(Additional reporting by Jan Harvey in London; Editing by Carole Vaporean and Lisa Shumaker)