NEW YORK/LONDON (Reuters) - Gold ended nearly 3 percent higher on Friday to a 1-week high on the back of record crude oil and the dollar’s drop after data showed a sharp rise in the U.S. unemployment rate and as equity markets slipped on worries about economic growth.
Gold rose to a high of $900.30 a troy ounce and was last at $896.80/898.20 an ounce by New York’s last quote at 2:15 p.m. EDT, compared with $874.55/875.95 late in New York on Thursday, when it hit $864.45 — its lowest level since May 15.
“There’ve been significant inflation fears out there, and they were alleviated for a few days with oil backing off, but the last two days’ gains in the oil market have put inflation right back on the front burner,” said Bill O’Neill, managing partner of LOGIC Advisors in Upper Saddle River, New Jersey.
U.S. crude futures soared more than $10.75 to end at record $138.54 a barrel on Friday, bringing gains in the last two days to $15 and boosting gold’s appeal as a hedge against inflation.
“You don’t have to look much further than that to see why gold should be up,” O’Neill said.
The active U.S. August gold contract on COMEX division of New York Mercantile Exchange settled up $23.50, or 2.7 percent, at $899.00 an ounce.
U.S. employers shed jobs for a fifth straight month in May and the unemployment rate jumped to its highest in more than 3-1/2 years, a Labor Department report showed.
“Gold rallied in line with moves down in the dollar. The worry is if unemployment is climbing, then mortgage defaults and subprime losses rise,” said David Thurtell, analyst at BNP Paribas.
U.S. unemployment rose to 5.5 percent in May from 5 percent, its highest since October 2004. Some 49,000 jobs were cut from payrolls in May, up from a revised 28,000 that were lost in April.
“The news is bearish for equities — so gold benefits as an alternate asset class,” Thurtell said.
U.S. stocks dropped 3 percent in late trade on Friday.
Meanwhile, O’Neill said that record crude oil combined with weak U.S. economic news could hamper the U.S. Federal Reserve’s ability to cut rates further, and that should bode well for gold in the near term.
Gold is traditionally used as a hedge against financial uncertainty, which often manifests itself in dollar weakness. It also makes commodities priced in the U.S. currency cheaper for holders of other currencies.
Also weighing on the dollar and boosting the euro and precious metals was a speech by European Central Bank president Jean-Claude Trichet, who said on Thursday that the central bank was on high alert over inflation.
“Its going to be a good day for gold. Essentially it’s hostage to the dollar,” said Nick Moore, analyst at ABN Amro.
Platinum gained nearly 4 percent to $2,079 an ounce, the highest since May 28. It was last at $2,064/2,084 an ounce from $2,000.50/2,020.50 an ounce late on Thursday.
Platinum hit a record high of $2,290 an ounce on March 4 as worries about supplies from South Africa mounted. South Africa is the world’s largest producer of the industrial metal used in autocatalysts.
“South African power shortages are keeping the platinum market on edge as a swift resolution to the structural problems looks far from near,” Barclays Capital said in a note.
“We see further upside potential in prices as platinum supplies are heavily dependent on South Africa and the delicate power supply situation as well as mine safety concerns leave mine output extremely susceptible to potential disruptions.”
Silver was up at $17.52/17.60 an ounce from $17.12/17.18 an ounce late on Thursday in New York. Spot palladium was up at $429/437 an ounce from its Thursday U.S. close of $421.00/429.00 an ounce.
Additional reporting by Chloe Fussell in London; Editing by Christian Wiessner