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NEW YORK/LONDON (Reuters) - Gold prices on Friday posted their biggest weekly rise since November 2009, achieved after a weak U.S. labor market report renewed fears about the health of the world's biggest economy and spurred safe-haven buying.
U.S. payrolls growth ground to a near halt in June, as employers hired the fewest workers in nine months, frustrating hopes that economic growth would pick up pace in the second half of the year.
Instead, some analysts and investors began speculating about how quickly a next government stimulus plan might be enacted in the United States, triggering safe-haven purchases.
"I think some people are looking at the jobs data as encouraging the next level of stimulus," said Tom Pawlicki, precious metals analyst at MF Global in Chicago, noting that it sent gold futures up toward their next resistance level at $1,550 per ounce.
Spot gold rose to a two-week high of $1,545.30 an ounce, then held around $1,543 for the rest of the session, up from $1,531.85 late in New York on Thursday.
Spot gold prices remained near the highs into late trade, gaining 3.8 percent, the most since early November 2009.
U.S. gold futures for August delivery extended their gains to a fresh two-week high at $1,546, and settled $11.0 higher at $1,541.60, and added to gains in after-hours trade.
The weaker-than-forecast June U.S. employment report dashed hopes that economic growth was picking up pace. Nonfarm payrolls rose by a mere 18,000, well below economists' expectations for a 90,000 rise. The unemployment rate rose to 9.2 percent, its highest in six months.
Adding to the weak tenor of the report, the department said the economy created 44,000 fewer jobs in April and May than previously thought.
Peter Fertig, a metals consultant at Quantitative Commodity Research noted that disappointing public-sector employment after Thursday's ADP report showing a strong increase in private-sector payrolls sparked safe-haven flows into gold.
The dollar dropped against several currencies as the U.S. jobs data strengthened expectations the U.S. Federal Reserve would leave interest rates low into next year, prompting investors to embrace alternate safe-haven assets like gold.
A weaker dollar also often boosts dollar-denominated assets, such as gold, because of the advantage it provides buyers outside the United States.
Analysts said they thought the dollar would likely trend lower in the week ahead in the aftermath of an abysmal U.S. jobs report and without clear signs of progress on the approaching U.S. debt ceiling deadline.
Both factors were also likely to spur further gold buying. But, analysts said, several other factors on the week's calendar could keep a lid on gains or, depending on their results, push the yellow metal through the upper end of its 2-1/2-month trading band, on its way toward all-time highs.
On the inflation front, China releases its producer and consumer price indexes on Saturday, and the United States reports the same next Thursday and Friday, respectively.
Gold received a couple of boosts this week when the Bank of China and European Central Bank each raised key interest rates to stave off potential inflation.
On Wednesday, Fed Chairman Ben Bernanke will testify before Congress in his semi-annual report. Investors will be listening carefully for any hints of further stimulus plans, though he is unlikely to reveal anything specific.
That said, spot gold will likely remain in the range that has defined its path since early May, when it hit a record peak at $1,575.79 per ounce.
"I'm thinking sideways to higher over the next several weeks, before it rallies and maybe even retests the highs in the next couple of months," said Pawlicki.
Among other precious metals, silver hit a four-week peak at $36.82 an ounce, and remained around $36.71 against $36.41 on Thursday.
Spot platinum eased to $1,734 an ounce from $1,739.85 on Thursday. Spot palladium edged down to $775.50 an ounce against $781.55 previously.
The platinum: palladium ratio -- the number of ounces of palladium needed to buy an ounce of platinum -- held at its lowest in more than four months at 2.23.
Reporting by Jan Harvey and Carole Vaporean; Editing by Marguerita Choy