NEW YORK/LONDON (Reuters) - Gold rose on Thursday, settling slightly higher as investors set positions ahead of the key U.S. employment report, forecast to show a worsening labor market, which could boost demand for safe-haven assets.
Concern about growth-linked assets ahead of the August jobs data sharpened investor appetite for bullion, as exchange-traded funds boosted their holdings.
But a slew of improved, though tepid, U.S. economic readings kept a lid on gold's rise on Thursday.
"People are reluctant to do much of anything today except position for tomorrow," said John Canally, investment strategist and economist at LPL Financial in Boston.
Gold bullion moved up to $1,251.25 by 2:32 p.m. EDT from $1,243.50 an ounce in late New York business on Wednesday. U.S. December gold futures rose $5.30, or 0.42 percent, to close at $1,253.40 an ounce.
December gold finished short of Wednesday's $1,256.60 peak, which was the highest since June 28.
Spot prices this week reached a two-month high at $1,254.65 after a raft of U.S. data suggested the world's largest economy could be slowing enough to warrant further quantitative easing from the Federal Reserve.
A weak U.S. labor market report on Friday could trigger a new round of safe-haven gold buying.
According to a Reuters poll, economists, on average, expect a decline of 100,000 in payrolls growth for August, as well as a nudge up to 9.6 percent in the unemployment rate.
Among the reports that some market participants said limited gold's gains on Thursday were better-than-expected U.S. homes sales data for July. U.S. jobless claims, factory orders and same-store sales data also showed some improvement.
Pending sales of previously owned U.S. homes rose unexpectedly by 5.2 percent in July, suggesting a tax credit-related housing market decline was close to bottoming.
Economists polled by Reuters had forecast the index would fall 1.0 percent in July. Compared to July last year, pending home sales fell 19.1 percent.
While encouraging data may limit gold's gains, analysts said economic worries will keep supporting a safe-haven bid.
"We know we are weak and we are not coming out of this in a 'V' shaped recovery. At best, we will have an 'L'. Now the next question has to be, does it get worse than the 'L' and turn lower?," said Howard Simons, strategist at Bianco Research.
The world's largest gold-backed ETF, New York's SPDR Gold Trust (GLD.P), said its holdings rose to 1,304.028 tonnes on September 1 from 1,302.508 tonnes the day before, having climbed in August after retreating in July.
Investors tend to favor physically backed bullion products as a haven from risk in times of economic or financial market uncertainty, analysts said.
"Monthly ETF inflows turned positive in August; these need to accelerate for gold to overcome potential scrap supply at these prices and rise sustainably through $1,250," Swiss bank UBS noted in a daily report.
Silver rose by about 1.5 percent to $19.64 an ounce against $19.32. The ratio of gold to silver -- or how many ounces of silver are needed to buy an ounce of gold -- fell to its lowest in 3-1/2 months at 64.29.
Holdings of the largest silver-backed ETF, the iShares Silver Trust, rose 53.27 tonnes on Wednesday, their largest one-day rise since May 13.
Platinum was up at $1,551.50 an ounce from $1,528, while palladium climbed to $525.25 an ounce from $516.
PGM metals were supported by strong Chinese car sales numbers, which showed a 59 percent sales rise in August from a year earlier. This helped offset data showing the weakest U.S. August car sales in 27 years.
Carmakers are the largest consumers of platinum group metals, which are widely used in catalytic converters.
Prices at 2:40 p.m. EDT (1840 GMT)
CLOSE CHG CHG CHG US gold 1253.40 5.30 0.4% 14.3% US silver 19.638 0.279 0.0% 16.6% US platinum 1551.50 15.80 1.0% 5.5% US palladium 523.45 5.10 1.0% 28.0%
Gold 1250.65 7.15 0.6% 14.1% Silver 19.64 0.32 1.7% 16.6% Platinum 1546.50 18.50 1.2% 5.5% Palladium 521.50 5.50 1.1% 28.6%
Gold Fix 1248.50 0.75 0.1% 13.1% Silver Fix 19.45 -2.00 -0.1% 14.5% Platinum Fix 1550.00 12.00 0.8% 5.7% Palladium Fix 521.00 2.00 0.4% 29.6%
Additional reporting by Jan Harvey; editing by Keiron Henderson and Alison Birrane; Editing by David Gregorio