Array

SINGAPORE, Sept 1 (Reuters) - Silver matched a three-month high on Friday before losing steam, while gold rose ahead of the release of a U.S. August payrolls report that may determine the Federal Reserve's next moves.

Spot silver hit a high of $12.89 an ounce, in line with a three-month peak hit on Thursday, but edged down to $12.84/12.91 an ounce by 0340 GMT. It was last quoted at 12.83/12.90 in New York.

''There was some offshore-related buying earlier which gave it good a support. People think silver is cheap and news of production drops in Mexico also gives them an excuse to buy,'' said a dealer in Hong Kong.

''But I don't see any physical buying in Asia,'' he said, referring to purchases from jewellers and the electronics sector.

Mexico's silver production fell to 182,282 kilogrammes in June, down 18.3 percent compared with a year ago, the National Statistics Institute said. Mexico is the world's largest producer of the metal.

Silver, which sometimes tracks gold, has shown some resilience in recent weeks, steadily moving upward since falling to a three-week low around $10 an ounce in mid-July. But the metal is still some way off a 25-year peak of $15.17 hit in May.

The metal rose nearly 3 percent in the U.S. market on investment demand and growth in a new U.S.-backed security. But trading was slow slow in Asia, dealers said, adding that the metal's sudden jump caught people by surprise.

''Honestly, I don't know yet what the month of September has for silver. I won't be asking my customers to chase the market. I would rather let silver come back down again to a decent level of $12.48 to $12.50 again,'' said a dealer in Singapore.

''Silver has climbed quite fast this time around, so I think it caught some people by surprise. But I would say silver has returned to the radar screen of some investors,'' he said.

Physical silver holdings in Barclays Global Investors' iShares Silver Trust climbed above 100 million ounces on Wednesday for the first time since the ETF was launched in late April. The security tracks the price of silver and trades on the American Stock Exchange.

Spot gold rose to $627.30/627.80 an ounce from $625.20/626.20 late in New York.

Benchmark gold futures on the Tokyo Commodity Exchange, currently August 2007, gained 27 yen per gram to 2,390 yen ($20.37), reflecting rises in New York.

Concerns about Iran's stand-off with the West has elevated gold's safe-haven role, but dealers were more likely to focus on the U.S.

non-farm payrolls report for August due out at 1230 GMT.

''The currency is playing an important role here. Near term, I think the support seems to hold around the $614 to $615 level,'' said commodities analyst Tobin Gorey of Commonwealth Bank of Australia in Sydney.

Trading would be range-bound ahead of the data, said Gorey, who pegged resistance at $630 and $637 an ounce.

The data is expected to show that employers added 120,000 jobs on the month, suggesting modest but steady growth that would probably keep the Fed comfortable about leaving rates at 5.25 percent. The dollar was quoted at 117.40 yen after reaching 117.50 on Thursday, its strongest since late July. It stood at $1.2810 and has been trapped in a tight range between $1.2940 and $1.2695 for the past month.

Platinum rose to $1,245/1,250 from $1,239/1,244 an ounce.

Palladium was slighty higher at $342/347 an ounce.

Precious Metals Prices by 0347 GMT* Metal Last Net change Pct Move Gold 626.90 1.90 +0.30 Platinum 1245.00 6.00 +0.48 Palladium 342.00 0.50 +0.15 Silver 12.84 -0.03 -0.23 Change in 2006 Metal Latest bid End prev year Pct Move Gold 626.90 517.20 +21.21 Platinum 1245.00 968.00 +28.62 Palladium 342.00 254.00 +34.65 Silver 12.84 8.81 +45.74 * The closing prices used to calculate the net change may differ from New York's last quoted prices.

($1=117.32 yen) REUTERS MQA BS1042