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NEW YORK (Reuters) - Gold rose toward $1,120 an ounce on Wednesday as the dollar declined against the euro, and platinum group metals also gained nearly 2 percent due to supply fears and strong physical demand.
Gold ended the first quarter up 1.4 percent.
Palladium rallied to a two-year high, and platinum climbed to just below a 20-month high after the world's No. 3 platinum producer Lonmin (LMI.L) said its largest furnace was shut with repairs expected to take over a month.
Sharp inflows into the first U.S. platinum and palladium exchange-traded funds (ETFs) and optimism about the auto industry's recovery have spurred buying of platinum group metals.
"There have been positive trends in industrial and jewelry demand, particularly from China, and we expect to see more investment demand driven by the ETFs," said Thomas Winmill, portfolio manager of Midas Fund (MIDSX.O).
Winmill said flat output of platinum group metals combined with a recovering global auto industry led by China should boost platinum and palladium prices.
More than half of the world's output of platinum group metals is used as catalytic converter to clean exhaust fumes from vehicles.
For the first quarter, palladium and platinum ended the first quarter 17 percent and 12 percent higher respectively, surpassing the single-digit gains posted by gold and silver.
Palladium hit a high of $483.50 an ounce, its loftiest since March 2008. It was last at $475 an ounce, up from $466.5 late in New York on Tuesday.
Platinum jumped to $1,648.50 an ounce, just below a 20-month high of $1,654 reached on January 20. It was last at $1,639.50 an ounce, up from $1,616.50.
"Investors have come back in, they've just got the bug. Overall, there's been some physical buying of platinum and palladium," said Commerzbank trader Rory McVeigh.
Palladium and platinum prices began to rally after ETF Securites Ltd. launched the first U.S. PGM exchange traded funds in early January, which now have about 900,000 ounces of the combined metals.
Platinum was also underpinned by worries about supplies from South Africa, the world's largest producer of the metal.
Spot gold was at $1,112.45 an ounce at 3:42 p.m. EDT, up from $1,102.50 an ounce late in New York on Tuesday.
U.S. June gold futures ended up $8.80 at $1,114.50 an ounce.
The dollar fell against the euro <USD/> after ADP Employer Services said its data showed U.S. private employers unexpectedly shed jobs in March. The report stoked concern about the economy two days before the closely followed government payrolls report.
"The ADP report came in weaker than expected, pushing the dollar down and gold higher. Fundamentals are bullish for gold, there's inflation concerns, Asian central bank buying, huge debt in the OECD," said Societe Generale analyst Jesper Dannesboe.
While heading for its sixth consecutive quarter of gains, gold was still about 10 percent below a record high around $1,226 struck in December. Also, the first quarter's rise was the smallest in the last three quarters.
Silver was last at $17.44 from $17.25. It was 3.6 percent higher for the quarter.
Additional reporting by Pratima Desai and Maytaal Angel in London; Editing by David Gregorio