Gold swung into positive territory, recovering from the six-week low it hit earlier on Friday, after a key US payrolls report missed expectations, sparking a retreat in the dollar. Spot gold was bid at $1,376.55 an ounce at 1605 GMT against $1,371.15 late in New York on Thursday, having earlier touched a low of $1,352.30 an ounce, its weakest since November 26.
The precious metal has recorded some hefty losses this week, but in the absence of a rising dollar it remains underpinned by uncertainty over the US recovery, the prospect of inflation in emerging markets, and concern over eurozone sovereign debt. "We still think there is support for gold out there," said David Wilson, an analyst at Societe Generale. "There is a perception of growing inflationary pressure into next year, which should remain supportive of gold."
"Our FX (team) are still expecting a weaker trend in the dollar to return, which again should be supportive for gold," he added. US gold futures for February delivery rose $5.40 an ounce to $1,377.10. The dollar pulled back from its near four-month high against the euro on Friday as investors continued to debate the outlook for the US economy after data showing weaker-than-expected jobs growth. "Wall Street traders and investors have become accustomed to link an improved consumer wealth effect with job creation; but, unfortunately, today's data proves that synergy is absent between them," said Todd Schoenberger, managing director of Landcolt Trading.
"What is painfully obvious is the main mission of both quantitative easing packages is failing. The intent of improving the wealth effect while stimulating job growth is not working." Notwithstanding a further rise, gold prices are still heading for their biggest weekly loss since July last year, after a raft of better-than-expected US data this week.
"The United States has had a whole run of decent data, and that has increased risk appetite and decreased gold's allure as a hedge," said VM Group analyst Carl Firman.
"If you have a sustained period of good, positive US data, which points towards a good US recovery, the dollar is bound to strengthen slightly, and that is generally negative for the gold price," he added.
Elsewhere the head of the Bombay Bullion Association told Reuters on Friday that gold imports to India, the world's largest consumer, are likely to jump 64 percent to 500-550 tonnes in 2011, driven by investment purchases. Gold-backed exchange-traded funds continued to see outflows, with holdings of the largest, New York's SPDR Gold Trust, falling to a seven-month low on Thursday. In supply news, China, the world's biggest gold producer, said its output of the metal rose more than 9 percent in the first eleven months of 2010 from the year before, and was expected to top a record 340 tonnes in the full year.
Silver firmed to $29.09 an ounce from $29.04, having earlier hit its lowest since mid-December at $28.30 an ounce. Holdings in the world's largest silver-backed ETF, the iShares Silver Trust, fell to 10,892.87 tonnes on January 6 from 10,917.19 tonnes a day before. Platinum was at $1,733.80 an ounce against $1,729, while palladium was at $756.70 against $758.50.
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