Gold edged up on Friday, gaining support from mixed European shares, but remained vulnerable after strong US jobs data lifted the dollar, denting gold's investment appeal. US employment growth jumped in June and the jobless rate closed in on a six-year low, providing evidence of economic growth heading into the second half of the year.
The data was published a day earlier than usual due to the July 4 Independence Day holiday, which will curb volumes trading throughout the session. The data stoked speculation the US Federal Reserve could hike interest rates earlier than expected. "At the moment it seems middle of next year (for the Fed to start raising rates) but if the first quarter, as some suggest, becomes consensus then we are going to see gold below $1,300," Societe Generale analyst Robin Bhar said.
Spot gold was down 21 cents to $1,319.49 an ounce at 1750 GMT. It fell 1.2 percent to a one-week low of $1,309.64 after the US nonfarm payrolls release on Thursday, but managed to claw back losses as the market expects more macro signs on the strength of the global economy, traders said. US gold futures for August delivery were up 50 cents at $1,321.00 an ounce.
"Gold did well to hold above $1,310 after the good employment numbers, but it remains somewhat of a concern that there seems to be a wall of selling every time we try a convincing push above $1,330," MKS Group said in a note. "Overall, it feels like the shorts might be gaining momentum over the longs but think we will remain in consolidation mode $1,310-$1,330 for the next couple of sessions as this week's data sinks in."
The dollar rose 0.1 percent against a basket of main currencies, holding just below a one-week peak, while European shares were mixed as investors took the opportunity to lock in profits after the biggest week of gains since March. A stronger US currency makes dollar-denominated assets like gold more expensive for foreign investors. But gold still looked set to post its fifth straight weekly gain, although a small one, as tensions in the Middle East and Ukraine supported prices at the start of the week.
In other news, gold producers will return to net hedging for the first time since 2011 this year, GFMS analysts at Thomson Reuters said on Friday, after Polyus Gold this week announced a two-year programme to sell gold forward. Other precious metals saw spot palladium rise as high as $865 an ounce, its highest since February 2001, before steadying at $857.50 an ounce.
Palladium, which along with platinum is used in catalytic converters in vehicle engines, was boosted by data earlier in the week that US auto sales hit an eight-year high in June. Strong demand from the auto industry and worries about supply after a five-month strike in major producer South Africa were pushing up prices, traders said. Silver was up 0.1 percent to $21.12 an ounce, platinum was last at 1489.00 an ounce.
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