PRECIOUS-Gold rises on euro zone jitters, ETF flow eyed

* Bundesbank's chief says euro zone crisis not over

* ETFs liquidation continues but at slower pace

* China's gold contracts volume strong

* Coming up: US import, export prices, retail sales Weds

(Updates throughout, changes byline, dateline, pvs LONDON) NEW YORK, March 12 (Reuters) - Gold rose nearly 1 percent on Tuesday after a top European Central Bank official said the euro zone crisis was not over, but the metal remained vulnerable as redemptions in gold-backed exchange-traded funds continued, analysts said. Bundesbank's chief Jens Weidmann, also a member of the ECB Governing Council, also said the German central bank had set aside billions more euros against what it deemed risky ECB moves. The metal briefly rose near $1,600 an ounce, a near two-week high. Last week, it had found support in an area near $1,560 an ounce, weighed down by an equities rally and an improving U.S. economic outlook. A lack of buying interest in gold investment products, however, could trigger another round of pullback, analysts said. "Prices appear to be building some mild upside momentum, but until liquidation in gold exchange-traded funds (ETFs) ceases, we do not expect too much on the upside for gold," said James Steel, metals analyst at HSBC. Spot gold was up 0.7 percent at $1,592.21 by 12:23 p.m. EDT (1623 GMT), on track for its biggest one-day gain in two weeks. Earlier, gold rose as much as 1.1 percent to $1,598.20 an ounce, its highest level since Feb 28. U.S. gold futures for April delivery gained $13.40 to $1,591.40 an ounce, as trading volume was on track to finish below its 30-day average, preliminary Reuters data showed. A brighter U.S. economic outlook appears to prompt momentum investors to favor equities over gold. Holdings of SPDR Gold Trust, the world's biggest gold-backed ETF, fell to the lowest since October 2011 at 1,236.729 tonnes as of Monday. Other analysts, however, said that the pace at which ETFs investors exit their positions has been easing in the past week, which should help stem recent losses in gold. On Friday, gold slid to a two-week low near $1,560 before ended flat after a better-than-expected U.S. nonfarm payrolls report. The Dow Jones industrial average was flat on Tuesday after it hit a record high for the fifth consecutive session on Monday.

PHYSICAL DEMAND IN ASIA Physical buying continued in Asia, also spurred by comments from Kikuo Iwata, nominee to the Bank of Japan's deputy governor role, reiterating that the central bank must boost the quantitative easing aiming at ending years of deflation. Precious metals interest remains high in China, with average daily trading combined volumes on the three main gold contracts on the Shanghai Gold Exchange in the first two months of the year rose 24 percent on the year, according to Reuters calculations. With major macro economic data lacking during the week, the next macro event is U.S. consumer inflation data on Friday, which is likely to provide some trading direction. The gold market was also monitoring the U.S. budget crisis, which some see as a threat to the nascent recovery in the world's top economy. Among other precious metals, silver was up 0.8 percent to $29.18, tracking gold's upward move. Platinum eased 0.2 percent to $1,590.99, and palladium fell 0.5 percent to $772 an ounce.

Prices at 12:23 p.m. EDT (1623 GMT)

LAST NET PCT YTD CHG CHG CHG US gold 1591.40 13.40 0.9% -5.0% US silver 29.170 0.317 1.1% -3.5% US platinum 1595.20 -6.00 -0.4% 3.7% US palladium 775.35 -3.85 -0.5% 10.2%Gold 1592.21 11.82 0.7% -4.9% Silver 29.18 0.23 0.8% -3.7% Platinum 1590.99 -2.41 -0.2% 3.5% Palladium 772.00 -4.06 -0.5% 10.0%Gold Fix 1594.00 11.50 0.7% -4.2% Silver Fix 29.25 35.00 1.2% -2.3% Platinum Fix 1604.00 10.00 0.6% 5.3% Palladium Fix 774.00 2.00 0.3% 10.7%

(Additional reporting by Clara Denina in London and Rujun Shen in Singapore; Editing by Bob Burgdorfer)