PRECIOUS-Gold up, silver hits 31-yr highs on inflation worry

* Oil, grains rallies, inflation worries underpin gold

* US gold futures volume set for one of weakest this year

* Silver soars to 31-year high;gold ratio lowest since '83

* Coming up: US FOMC March meeting minutes Tuesday

(Rewrites, updates with comment, details, market activity)

By Frank Tang

NEW YORK, April 4 (Reuters) - Gold rose and silver surged to 31-year highs on Monday, as fresh gains that pushed oil and grain prices to their highest since 2008 stoke inflation worries.

While silver streaked ahead, rising to its strongest relative to gold since 1983 after the Hunt Brothers cornered the silver market, bullion prices have struggled for the past month to sustain new highs.

Activity in the U.S. futures market on Monday was less than half the average, set to be one of the weakest this year, as the metal struggled to extend its record high $1,447.40 an ounce set on March 24.

"There is no question that the inflation factor is supporting gold," said Bruce Dunn, vice president of precious metals dealer Auramet Trading. "Both gold and silver are benefiting from speculative buying and good demand from physical bars and coins."

Spot gold rose 0.4 percent to $1,433 an ounce by 3:34 p.m. EDT (1934 GMT), off an earlier high of $1,438.55 an ounce.

U.S. gold futures for June delivery settled up 0.3 percent to $1,433. Total COMEX trade was less than 82,000 lots, one of the quietest sessions this year, preliminary Reuters data showed.

Rising oil and grain prices boosted gold's inflation hedge appeal. U.S. oil rose to a 2-1/2-year highs on geopolitical risks to supply from the Middle East, while corn futures rallied to the highest level since the 2008 global food crisis due to very tight supplies. [O/R] [GRA/]

Silver climbed to its highest in 31 years at $38.58 an ounce, sending the gold-to-silver ratio to its lowest level in 18 years. It was later up 2 percent at $38.48.

Silver prices are fast closing in on $40 an ounce, lifted by interest in the metal as a cheaper proxy for gold and expectations that industrial demand is set to improve. But analysts remain wary of silver's extreme volatility, which has led to some heart-stopping reversals in recent years. [ID:nLDE7331DB]

"There is a huge amount of speculative drive behind silver, and that is off the back of gold," said Societe Generale analyst David Wilson.

ECB RATE HIKE, DOLLAR STRENGTH EYED

Bullion rose as the the euro hovered near a five-month peak against the dollar, with the ECB expected to raise rates by 25 basis points from a record low in reaction to rising inflationary pressures in the euro zone, with two more 25 basis point hikes factored in by year-end. [FRX/]

Bullion investors chose to side with expectations of a weakening dollar after the ECB meeting this week, as rising interest rates are generally negative for gold, as they raise the opportunity cost of holding non-yielding assets.

Even as most economists agree the Fed will not tighten monetary policy in the short term, recent hawkish comments by top Fed officials are weighing on bullion investor sentiment.

On Monday, Atlanta Fed President Dennis Lockhart said on Monday U.S. inflation is likely to remain low for now, but policymakers will keep a close eye on potentially self-fulfilling consumer expectations for higher prices. [ID:nN04244409]

Last November, the Fed initiated a $600 billion bond buying program -- dubbed QE2 because it is the second round of quantitative easing -- which is scheduled to end in June. Gold has been a major beneficiary since the Fed has kept short-term rates near zero since December 2008.

Gold is also benefiting from concerns some smaller euro zone economies such as Portugal and Ireland will continue to struggle with sovereign debt, and from unrest in the Middle East and North Africa.

For platinum group metals, platinum rose 1 percent to $1,782 an ounce, while palladium gained 1.5 percent to $781.22. Prices at 3:35 p.m. EDT (1935 GMT)

LAST/ NET PCT YTD

CLOSE CHG CHG CHG US gold 1432.20 4.10 0.3% 0.8% US silver 38.494 0.762 0.0% 24.4% US platinum 1787.00 10.10 0.6% 0.5% US palladium 784.40 9.35 1.2% -2.4% Gold 1433.00 5.02 0.4% 1.0% Silver 38.48 0.74 2.0% 24.7% Platinum 1782.00 17.00 1.0% 0.8% Palladium 781.22 11.27 1.5% -2.3% Gold Fix 1435.50 3.00 0.2% 1.8% Silver Fix 38.46 83.00 2.2% 25.6% Platinum Fix 1781.00 2.00 0.1% 2.9% Palladium Fix 785.00 5.00 0.6% -0.8% (Additional reporting by Jan Harvey in London;editing by Sofina Mirza-Reid)