PRECIOUS-Gold rises 1 pct, notches 10th quarterly gain

* Gold up 1 pct in Q1, smallest qtly gain since Q3 2008

* Dollar weakness, oil, grains rallies boost bullion

* Silver up 22 pct for Q1, gold/silver ratio falls

* Coming up: U.S. March nonfarm payrolls report Friday (Rewrites, updates comments, market activity, previously NEW YORK/LONDON)

By Frank Tang

NEW YORK, March 31 (Reuters) - Gold prices rose nearly 1 percent on Thursday, notching a 10th straight quarterly gain, as the dollar fell and as rallies in oil and grain prices boosted gold's appeal as a hedge against inflation.

Ultra-loose monetary policies by central banks, euro zone debt fears and political unrest across the Middle East have been major drivers for gold, even as the metal gained only 1 percent, the smallest quarterly rise since 2008, before the financial crisis took hold.

"The second quarter is going to be another positive quarter for gold. You still have Middle East and the sovereign debt crisis, which are certainly far from over, and inflation is becoming an increasingly important factor," said Bill O'Neill, managing partner of commodities firm LOGIC Advisors.

"You will see funds continue to be net buyers of gold, silver and platinum in the second quarter," he said.

Spot gold rose 0.8 percent to $1,435.10 an ounce by 3:57 p.m. EDT (1957 GMT).

U.S. gold futures for June delivery ended up 1.1 percent at $1,439.90, with volume lower than usual as investors have completed rolling their contracts to June from April on first-notice day on Thursday.

Bullion also notched its biggest one-day gain in nearly two weeks, a day before Friday's U.S. non-farm payrolls for March, considered a key indicator of the health of the U.S. economy. [ID:nN30121489]

Investors bought gold to hedge against uncertainty related to Friday's job report, traders said. Inflation worries also benefited gold as oil rallied on supply worries from the Middle East, and as grains surged as strong demand whittled down stocks. [O/R] [GRA/]

On charts, the metal is expected to break out of its recent base and rally toward a record $1,500 an ounce, after it has built up a large space to consolidate recent gains from the latter half of 2010. [ID:nN31566525]

Silver gained 0.7 percent to $37.71 an ounce. Silver posted a ninth consecutive quarterly gain, with a 22 percent increase in the first three months of the year, as investors bet on further gains in gold and expectations that industrial demand will improve.

Earlier in Thursday's session, the gold/silver ratio dropped below 38, its lowest level since 1983.

(Graphic: http://link.reuters.com/dyw78r)

EURO ZONE DEBT JITTERS

Gold was also supported as the euro outperformed the dollar on inflation data that firmed expectations the European Central Bank would raise interest rates, but the unit's strength may prove temporary, with peripheral debt issues seen persisting in the second quarter.

Concerns over euro zone sovereign debt were a major factor in last year's 30 percent rise in the price of gold.

On Thursday, rating agency Moody's warned further sovereign ratings downgrades for euro zone countries could not be ruled out, which fed ongoing investor concern about the region's finances. [ID:nLDE72U0JG]

The prospect of monetary tightening in the United States and the euro zone has undermined some of the appeal for gold, which has seen a net outflow of 2.18 million ounces of metal, or 3.5 percent, from the major exchange-traded funds this year.

Signs the U.S. jobs market is recovering could support calls from some Federal Reserve officials to wind up the central bank's monetary easing program earlier than expected.

Platinum rose less than $1 to $1,766.49 an ounce, while palladium gained 1.4 percent to $762.47.

Prices at 3:57 p.m. EDT (1957 GMT)

LAST/ NET PCT YTD

CLOSE CHG CHG CHG US gold 1439.90 15.00 1.1% 1.3% US silver 37.888 0.377 0.0% 22.5% US platinum 1783.20 9.10 0.5% 0.3% US palladium 767.90 9.80 1.3% -4.4% Gold 1435.10 11.72 0.8% 1.1% Silver 37.71 0.27 0.7% 22.2% Platinum 1766.49 0.64 0.0% -0.1% Palladium 762.47 10.69 1.4% -4.6% Gold Fix 1439.00 8.00 0.6% 2.0% Silver Fix 37.87 34.00 0.9% 23.6% Platinum Fix 1773.00 2.00 0.1% 2.4% Palladium Fix 766.00 5.00 0.7% -3.2% (Additional reporting by Amanda Cooper in London; Editing by Walter Bagley)