NEW YORK (Reuters) - Gold rebounded 1 percent on Friday a day after a sharp retreat, as a weak U.S. employment report spurred buying by investors who expect the Federal Reserve will start buying government debt again to stimulate the economy.
It was the fourth consecutive weekly rise for both gold and silver. For the week, silver was up 5 percent, outperforming gold’s 2 percent rise.
A U.S. Labor Department report showed the U.S. economy shed jobs in September for the fourth month in a row as government payrolls fell and private hiring slowed.
Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management, said that the weak jobs data should push the Fed toward trying to stimulate growth through what is known as quantitative easing, or QE2 as the market calls it.
“Quantitative easing means more money in the system. With that, there’s going to be possible market devaluation. And as the currencies lose value, how do you protect against that? A lot of people are looking into gold,” he said.
Spot gold was up 0.9 percent at $1,344.35 an ounce at 2:58 p.m. EDT (1858 GMT) , after peaking at $1,349.70 an ounce in earlier trade.
U.S. gold futures for December delivery settled up $10.30 an ounce at $1,345.30. Final volume was about 195,000 lots, 50 percent above its 30-day average, preliminary Reuters data showed. COMEX gold open interest eased but held near a record high 621,941 lots as of Wednesday.
Gold prices were choppy early, hitting a session low of $1,324.85 an ounce after St. Louis Fed chief James Bullard said policy makers face a tough decision at next month’s meeting.
The Reuters-Jefferies CRB index, a global commodities benchmark, hit two-year highs as U.S. grains and oil markets led a broad commodities rally, while the dollar slipped to new lows against a basket of major currencies.
The dollar fell 7.5 percent last month versus the euro, its biggest monthly decline since December of 2008.
Gold has rallied about 10 percent since the end of August. It hit a record high on Thursday of $1,364.60 an ounce before finishing lower for the day. The precious metal is viewed as a hedge against inflation and dollar depreciation. (Graphic: r.reuters.com/kaf27p )
Some investors thought gold’s sharp drop on Thursday after hitting a record high might signal the start of a correction. Hansen said a resilient dollar may yet keep gold from rising too high.
Gold investors are also waiting to see how this weekend’s annual meeting of the International Monetary Fund and World Bank will affect foreign exchange markets.
The world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, reported a 13.4 tonne outflow on Thursday, the biggest one-day drop in its holdings since late July.
Commerzbank wrote in a note that the outflows from gold ETFs signal that short-term speculators caused the latest swift rise in gold prices.
Among other precious metals, silver surged 2.8 percent to $23.15 an ounce, near Thursday’s 30-year high of $23.51 an ounce.
Platinum rose 0.5 percent to $1,699.50 an ounce, while palladium climbed 0.9 percent to $584.50.
Additional reporting by Jan Harvey in London
Editing by Alden Bentley