* Gold extends gains on firm euro * Worries about China's attempt to quel inflation linger * Coming Up: U.S. PPI/Core PPI for February, 1230 GMT (Updates prices, adds quotes) By Lewa Pardomuan SINGAPORE, March 17 (Reuters) - Gold rose further on Wednesday after having gained more than 1 percent the previous day as a U.S. Federal Reserve decision to hold interest rates unchanged burnished the metal's investment appeal. Gold has risen as much as 2.6 percent this week after investors turned to the metal for safety because of currency volatility related to debt problems in Europe, but a break above a recent high near $1,150 was needed to sustain the gains. Spot gold was at $1,126.60 an ounce by 0241 GMT, up $1.90 from New York's notional close on Tuesday, when it hit an intraday high of $1,128.45, its strongest since March 8 -- within sight of a 6-½ week high at $1,144.60 hit in early March. Gold was about 6 percent below record of around $1,200 struck in early December. A firmer euro supported gold but there were also worries China would tighten up after consumer inflation jumped to a 16-month high, possibly denting its appetite for commodities. "Some investors have pushed up the gold price because of weak dollar. I think sentiment is still flat. It's not really too bullish," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. "We don't know when the Chinese are going to increase the interest rates. I think people are pretty cautious. Gold will go up by another $10 or $20 and then backtrack," he added. China has already tightened bank reserve requirements twice this year, with each move hitting commodity markets worried about demand growth. U.S. gold futures for April delivery rose $4.3 an ounce to $1,126.80 after gaining 1.5 percent in previous session on fund buying and a rally in oil prices. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust , said its holdings stood at 1,115.511 tonnes as of March 16, unchanged from the previous business day.[GOL/SPDR] The dollar held near one-month lows against a basket of currencies on Wednesday as investors cut long positions after the U.S. Fed retained its dovish bias by pledging to keep interest rates low. [USD/] The euro also held onto broad gains against the dollar at $1.3765 after rising early 0.7 percent on Tuesday on the Fed's statement and by Standard and Poors' removing Greece from negative ratings watch. Interest rates near zero reduces the yield appeal of the U.S. dollar against higher-yielding currencies but boosts gold's appeal as an alternative investment. The physical market slowed to a trickle but sales of scrap were limited, which suggested that jewellers were waiting for higher prices, said dealers. "Investors are buying back gold after the Fed decided to keep interest rates unchanged," a dealer in Hong Kong said. "The physical market is quiet because the price is moving higher, but there's not a significant amount of scrap being returned. That's why the market is balanced." Oil prices extended overnight gains and rose above $82 a barrel on Wednesday, supported by a weaker dollar and expectations that producer group OPEC will keep oil output cuts in place at a meeting later in the day. [O/R] Precious metals prices at 0241 GMT Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 1126.60 1.90 +0.17 2.82 Spot Silver 17.42 0.02 +0.11 3.51 Spot Platinum 1629.00 -4.50 -0.28 11.04 Spot Palladium 466.75 -3.25 -0.69 15.10 TOCOM Gold 3285.00 51.00 +1.58 0.80 31321 TOCOM Platinum 4719.00 27.00 +0.58 7.72 11487 TOCOM Silver 51.20 0.90 +1.79 -0.97 249 TOCOM Palladium 1355.00 20.00 +1.50 16.31 341 Euro/Dollar 1.3770 Dollar/Yen 90.40 (Editing by Himani Sarkar)

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