Gold ends tad up on dollar drop after weak payrolls

NEW YORK/LONDON (Reuters) - Gold ended slightly firmer in mixed trade on Friday after the U.S. government reported surprisingly weak jobs data, as the dollar softened against the euro and oil ticked up.

“We are pretty much range-trading here in gold, as the U.S. dollar didn’t react too much after the figures,” said Commerzbank senior trader Michael Kempinski.

“We see some physical demand at $730 and lower,” he added.

Spot gold was at $734.10 at 3:28 p.m. EST (2028 GMT), up 0.5 percent from Thursday’s close of $732.95.

U.S. December gold futures settled up $2.00 at $734.20 an ounce amid light volume on the COMEX division of the New York Mercantile Exchange.

Labor Department data showed U.S. employers cut payrolls by 240,000 in October. The unemployment rate hit 6.5 percent, its highest since 1994. The dollar declined as investors worried about the outlook for the U.S. economy. <USD/>

Analysts said a bounce in the dollar could put a damper on gold’s rise in the near term.

“The dollar is likely to remain fairly strong, so that will cap rallies (in gold), and the oil price is not providing much support,” said Calyon analyst Robin Bhar.

“All the time we have worries about the economy and the financial system, so we will see safe-haven buying, but I suspect on dips,” he added.

Gold has been pressured in recent months by a recovery in the dollar as the economic crisis has spread.

Strength in the U.S. currency tends to weigh on gold, often bought as a currency hedge. Some forex analysts believe the dollar will stay firm despite negative U.S. economic data.

Still, fears over the outlook for the global economy are boosting the precious metal’s appeal as a haven from risk.

A series of interest rate cuts in Europe on Thursday boosted stock markets, but gains were not sustained.

“While (the cuts) add to the enormous monetary stimulus already in motion globally, markets remain unconvinced that it is enough to save the world from a major economic downturn,” noted Standard Bank analyst Walter de Wet.

Low interest rates should boost the appeal of gold, as it will cut the opportunity cost of investing in noninterest bearing assets such as the precious metals.


Platinum was at $845 an ounce, up from Thursday’s close of $826.50. Its sister metal palladium tracked platinum higher to $220.50 an ounce, against $215 on Thursday.

A supply outage in major producer South Africa, where Anglo Platinum AMSJ.J said a smelter shutdown would cut output by up to 200,000 ounces, and a weaker dollar are helping platinum to rise, analysts said.

“People are looking at the charts and realising both platinum and palladium have broken out of the downtrend in the charts, and that is bringing in more funds on the long side,” says Mitsubishi precious metals strategist Tom Kendall.

“There is a reasonable chance that we have seen the lows in platinum, and probably in palladium also,” he added.

Interest in platinum has been renewed after the metal fell more than 50 percent from July onwards, with investors seeking to buy into the metal at lower prices, traders said.

Both platinum and palladium have been pressured sharply lower by fears demand for the metals from automakers, who account for around half of annual consumption, will decline in the face of the economic slowdown.

Ford Motor Co F.N posted a worse-than-expected quarterly loss on Friday and said it will explore asset sales as its cash reserves become depleted as sales fall.

Among other precious metals, spot silver was essentially flat at $9.96 compared with its previous close late in New York on Thursday.