LONDON (Mar 9): Gold rose on Monday as the dollar rally paused but remained near a three-month low after a strong U.S. jobs report boosted expectations the Federal Reserve would soon raise interest rates.

Spot gold rose 0.5 percent to $1,173.26 an ounce by 1033 GMT. It fell 2.6 percent on Friday, its biggest daily loss since Oct. 1, 2013, and reached its lowest since Dec. 1 at $1,163.45 after the U.S. nonfarm payrolls.

"What we saw on Friday, even though it was a big day for gold, the U.S. dollar and rates, it is still part of this gradual recovery in the U.S. economy that will continue to evolve throughout this year," Julius Baer commodity analyst Warren Kreyzig said.

Data showed U.S. employers stepped up hiring in February and the jobless rate fell to its lowest level since May 2008, sending Treasury yields higher.

Higher interest rates could dent demand for non-interest-bearing assets such as gold.

"The number fuelled expectations that the Fed will now raise rates sooner rather than later, with the consensus now back to a June increase as opposed to September," said INTL FCStone in a note.

The dollar paused after hitting a 11-1/2 year high against a basket of leading currencies, dropping 0.3 percent.

Traders were also focusing on the outcome of a Monday meeting of euro zone finance ministers, who are due to discuss a recent letter of pledged reforms sent by Greece.

Persistent uncertainty over the debt crisis, which could see Greece exit the eurozone, could boost retail demand for gold.

In a sign of waning investor interest, holdings in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell to the lowest in more than a month on Friday, while speculators cut net long positions in COMEX gold futures and options for a fifth straight week.

Demand for physical bullion in the main Asian markets following the price dip, could provide some support, traders said.

Premiums in the second biggest gold consumer China largely traded between $5 and $6 on Monday, up from $4 to $5 in the previous session, a sign of increased demand.

Spot silver fell to its lowest in two months at $15.69 an ounce in earlier trade before trading up 0.1 percent at $15.92. Palladium was up 0.5 percent at $819.75 an ounce, while platinum fell to its lowest since mid-July 2009 at $1,145.95 an ounce.