* Dollar index falls after U.S. services report
* Political turmoil in Egypt, Portugal support
* U.S. market closed on Thursday for Independence Day holiday
* Investors brace for Friday’s jobs report (Adds comment, changes byline and dateline, pvs LONDON)
By Josephine Mason and Clara Denina
NEW YORK/LONDON, July 3 (Reuters) - Gold rose almost one percent on Wednesday, as the dollar remained under pressure after mixed U.S. data and political turmoil in Egypt and Portugal triggered safe haven buying.
Volumes thinned as traders were reluctant to take big positions ahead of the U.S. Independence Day holiday on Thursday and key U.S. nonfarm jobs data on Friday.
Spot gold rose as much as 1.5 percent to a session high of $1,259.60 an ounce earlier and was at $1,252.91 an ounce at 2:55 p.m. EDT (1855 GMT), up 0.93 percent.
U.S. gold futures for August delivery settled up $8.5 at $1,251.9 an ounce.
“Today’s strength is more to do with the dollar and equities markets after bad euro zone data, mixed U.S. numbers and renewed worries about Portugal and Greece,” VTB Capital analyst Andrey Kryuchenkov said.
The shake up in the Portuguese government and nervousness over the state of Greece’s next tranche of bail-out money returned attention to the European debt struggle and coupled with unrest in Egypt, triggered some safe-haven buying.
Even so, gold was knocked off its intraday highs after data showed a pick up in the U.S. and reinforced expectations the Federal Reserve will curb its stimulus program this year. The dollar fell off an earlier five-week peak.
The U.S. private sector created more jobs than expected in June, while U.S. initial weekly jobless claims fell for a second straight week.
Other data was less upbeat. A report showed the U.S. services sector in June grew at its slowest pace in more than three years.
But analysts said Wednesday’s employment data points to an upbeat jobs report on Friday from the Labor Department, which is expected to show the economy created 165,000 jobs last month.
“It would be very bad for gold if you get a non-farm payrolls number good enough for the Fed to taper but at the same time not strong enough to see any inflationary pressure coming through,” BofA Merrill Lynch analyst Michael Widmer said.
Gold has jumped 7 percent after hitting $1,180, its lowest price in almost three years, last Friday, but many traders view the gains as little more than a “dead-cat bounce,” slang for a small but temporary rally that follows significant declines.
“The bounce will be viewed as just that until there is a key indicator that would change market perceptions of a need for financial protection,” said Carlos Perez-Santalla, a broker at Marex Spectron.
Gold posted its biggest ever quarterly loss of almost 23 percent for the April-June period after Fed Chairman Ben Bernanke announced the U.S. economy was recovering strongly enough for the bank to begin tapering its stimulus in the next few months.
This would support a rise in interest rates, making gold less attractive.
However, the exact timing of the Fed’s move remains unclear.
Sentiment remained guarded however as outflows from exchange-traded funds (ETFs) continued and physical demand failed to pick up after prices plumbed a three-year low of $1,180.71 on Friday.
Holdings of the world’s largest gold-backed exchange-traded fund SPDR Gold Trust fell 0.37 percent to 964.69 tonnes on Tuesday, hitting fresh lows since February 2009.
Physical demand for gold has not emerged as it did in April, when prices fell the most in 30 years, and premiums remained steady in main Asian markets as refineries prepare to shut for house-keeping during the summer period, traders said.
Silver tracked gold’s gains, up 2 percent to $19.74 an ounce. Platinum fell 1.6 percent to $1,341.75 an ounce and palladium slipped 0.17 percent to $682.72 an ounce. (Editing by Jeff Coelho, David Evans and Chris Reese)