PRECIOUS-Gold holds gains as US jobs data soothes interest rate fears

Mon Apr 7, 2014 3:19am EDT

* Gold steady after 1.2 pct gain on Friday
    * SPDR sees 1.8 tonne outflow
    * Physical markets quiet; China closed for holiday

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, April 7 (Reuters) - Gold held on to gains on
Monday following its biggest one-day jump in more than three
weeks as investor worries about an early U.S. interest rate hike
eased when the nonfarm payrolls report failed to meet market
expectations.
    Data on Friday showed that U.S. nonfarm payrolls increased
by 192,000 jobs last month, slightly below economists' estimate
of 200,000. 
    Markets feared that a strong jobs report, which followed a
recent string of good economic data, could prompt a quicker
tightening of U.S. monetary policy. Federal Reserve Chair Janet
Yellen indicated last month that interest rates could rise in
the first half of 2015. 
    Low interest rates, which cut the opportunity cost of
holding non-yielding bullion above other assets, had been an
important factor driving bullion higher in recent years.
    Spot gold was steady at $1,300.50 an ounce by 0640 
GMT, after gaining 1.2 percent on Friday - its biggest one-day
percentage increase since March 12. The metal wasn't too far
from a one-week high of $1,306.50 hit in the previous session.
    "It's a relief rally because markets were expecting a much
stronger payrolls number," said a Sydney-based trader. "It was
only a small miss but people are glad that nothing much is going
to change with the stimulus because of this."
    The state of the U.S. economy will continue to be the prime
factor driving gold prices in the near term, said Helen Lau,
analyst at UOB-Kay Hian Securities.
    Despite the weak jobs report, data on Friday showed that
investors pulled money out of bullion, raising the risk that the
gains in prices might not last. 
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings fell 1.80 tonnes to
809.18 tonnes on Friday. 
    Hedge funds and money managers reduced their bullish bets in
gold futures and options for a second straight week as easing
geopolitical tensions and a stronger tone to the U.S. economy
triggered gold selling, data from the Commodity Futures Trading
Commission showed. 
    In the physical markets, demand was subdued as markets in
top buyer China were closed for the Tomb Sweeping holiday.
    Weak physical demand has weighed on gold prices recently,
due to discounted prices and weak imports by China over the last
month. 
    
    PRICES AT 0640 GMT
 Metal             Last      Change    Pct chg
                                                
 Spot gold           1300.5     -1.62      -0.12
 Spot silver           19.8     -0.09      -0.45
 Spot platinum      1435.49     -8.01      -0.55
 Spot palladium         787       0.5       0.06
 Comex gold            1301      -2.5      -0.19
 Comex silver         19.84    -0.106      -0.53
 Euro                1.3702                     
 DXY                 80.404                     
                                                
 COMEX gold and silver contracts show the most
 active months
 
 (Editing by Gopakumar Warrier and Muralikumar Anantharaman)
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