* U.S. trade deficit surges in April
* U.S. initial jobless claims dip below 2 million
* Dollar hovers close to three-month low
* SPDR Gold Trust holdings at highest since April 2013 (Updates prices)
By Asha Sistla
June 4 (Reuters) - Gold rose more than 1% on Thursday as the dollar retreated and Wall Street paused its recent rally as dismal U.S. trade data overshadowed slightly upbeat labor market numbers and optimism about an economic rebound.
Spot gold XAU= was up 1.3% to $1,719.42 per ounce by 2:34 p.m. EDT (1834 GMT). U.S. gold futures GCcv1 settled up 1.3% at $1,727.40.
"Equity markets are still trading in the red and for gold market participants, that's interpreted as a bout of risk-off and is leading to an increase in investment demand," said Daniel Ghali, commodity strategist at TD Securities.
After a strong rally on Wednesday, U.S. stock indices edged lower despite data showing U.S. weekly jobless claims dipped below 2 million for the first time since mid-March. .N worries about an economic slowdown, the U.S. trade deficit surged in April as the COVID-19 pandemic upended the global flow of goods and services, pushing exports to a 10-year low. dollar .DXY also held near its lowest level in about three months, making gold cheaper for holders of other currencies. USD/
While gold has shown it can rally in a risk-on environment as well, "an equity market correction could also weigh on gold in the near term should liquidity needs materialise again," Standard Chartered (LON:STAN) analyst Suki Cooper said in a note, forecasting prices to average $1,700 in the third quarter.
Earlier in the day, the European Central Bank beefed up its bond-buying programme to support the euro zone economy, briefly boosting equities. MKTS/GLOB
Holdings in the SPDR Gold Trust GLD ETF rose to 1,133.37 tonnes on Wednesday, the highest since April 2013. GOL/ETF
Gold-backed exchange-traded funds (ETFs) added 623 tonnes of the metal worth $34 billion to their stockpile from January to May, exceeding in five months every full-year increase on record, the World Gold Council said on Thursday. palladium XPD= fell 1% to $1,928.95 per ounce, while platinum XPT= climbed 2.1% to $843.03. Silver XAG= rose 0.9% to $17.82.