London: Gold rose on Thursday as a drop in equities boosted its appeal as an alternative asset, heading for its biggest quarterly gain in nearly 30 years as expectations that the Federal Reserve would press ahead with interest rate hikes receded.

The metal is highly exposed to rising rates, which lift the opportunity cost of holding non-yielding assets while boosting the dollar. It fell 10 percent last year ahead of the first US rate increase in nearly a decade in December.

Spot gold was up 0.8 percent at USD 1,234.61 an ounce at 0921 GMT, while US gold futures for April delivery were up USD 8 an ounce at USD 1,236.60.

Gold has climbed 16 percent in the first three months of this year, its biggest quarterly rise since 1986, as concerns over global growth battered equities and sparked a wave of safe-haven buying.

"A combination of safe-haven demand on the back of worries about China in particular, a scaling back of expectations of further rate hikes from the Fed, and rising inflation expectations ... have been behind the rally in the gold price," Capital Economics analyst Simona Gambarini said.

"Overall real interest rates will remain low, which is what matters for gold."

The metal rallied late on Tuesday after Fed Chair Janet Yellen said the U.S. central bank should proceed only cautiously in raising interest rates.

World stocks fell for the first time in four days on Thursday as a roller-coaster quarter drew to a close, while the dollar retreated 0.2 percent against the euro.

Attention is now turning to US non-farm payrolls data on Friday, a key barometer of the health of the world`s biggest economy. A soft reading could further boost gold.

"The possibility that the jobs number may be good and therefore bearish for gold was reinforced by news that the private sector added 200,000 net new jobs in March, according to the ADP National Employment Report," HSBC said in a note.

Holdings of the world`s biggest gold-backed exchange-traded fund, New York`s SPDR Gold Shares, fell for a second session to 819.28 tonnes on Wednesday.

Higher gold prices curbed demand for the precious metal in Asia this week, with premiums in several major markets taking a hit, traders in the top consuming region said.

Silver was up 0.7 percent at $15.36 an ounce, while platinum was up 1.3 percent at USD 972.23 an ounce and palladium was up 1.3 percent at USD 569.47 an ounce.