PRECIOUS-Gold rebounds after biggest quarterly drop on record
* U.S. dollar index steadies off 4-week highs
* Investors focus on ECB meeting, U.S. payrolls this week
* Investment demand still seen as weak
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LONDON, July 1 (Reuters) - Gold prices rose on Monday, rebounding after posting its biggest quarterly loss on record, as the dollar steadied ahead of a raft of data this week which traders hope will give more clues on the outlook for U.S. stimulus measures.
Speculation that the Federal Reserve will rein in its $85 billion monthly bond purchase programme led gold to fall to its lowest in nearly three years last week.
Investor confidence in the metal has been eroded - gold plunged 23 percent in the second quarter - by rising talk of an end to the Fed's ultra-loose monetary policy, which would support a rise in interest rates, making gold less attractive.
Spot gold was up 0.3 percent to $1,237.24 by 1412 GMT, well off Friday's near three-year low of $1,180.71. Comex gold futures for August delivery were up 1.2 percent at $1,237.90.
"This (bounce) would be an expected reaction to the retreat last week with some buying emerging near three-year lows," Andrey Kryuchenkov, an analyst at VTB Capital, said. "I don't think it's sustainable while volumes remain relatively low."
"I doubt there will be a lot of bargain hunting given a whole array of macro numbers this week, including the ECB statement (and with) non-farms in focus," he added. "The market is putting extra weight on U.S. economic releases."
A strong reading in Friday's U.S. payrolls report would likely lift both Treasury yields and the dollar, and depress gold. The European Central Bank's policy meeting on Thursday is likely to emphasise that the euro zone economy is in a different stage of recovery than the United States.
The dollar index retreated from a four-week peak hit on Friday. European equities rose 1.2 percent, adding to their gains after data showed U.S. manufacturing activity grew a touch above of expectations in June.
ETF HOLDINGS DROP
Holdings of gold exchange-traded funds (ETFs) have fallen this year, with outflows exacerbated by the recent price drop. Divestment from the largest ETF fund SPDR Gold Trust totalled nearly 13 million ounces so far this year.
Hedge funds and money managers slashed their bullish bets in gold futures and options to their lowest levels in six years, a report by the Commodity Futures Trading Commission showed on Friday.
Lower prices in the past few weeks have failed to rekindle physical demand in Asia, traditionally the top buyer of gold.
Asian consumption had helped limit some of the metal's losses when prices fell the most in 30 years in April.
"While the physical market was able to suspend the downward trajectory of gold in April following hefty disinvestment, this time, preliminary data suggest a much weaker physical market footing," Barclays analysts said in a note.
The bank cut its 2013 price forecast to $1,393 an ounce from $1,483.
Sales of American Eagle gold bullion coins plunged to 57,000 ounces in June, the lowest since August last year, as physical demand from retail investors and collectors sank.
Silver turned negative after a steady start, down 0.4 percent to $19.54 an ounce. It reached a near three-year low at $18.19 in the previous session.
Platinum rose 1.8 percent to $1,362.74 an ounce and palladium jumped 3.4 percent to $678.22 an ounce.
(Additional reporting by Jan Harvey; editing by James Jukwey and Jeff Coelho)