Gold fell in volatile trade on Friday after data showed the US economy shed more jobs than expected in January, boosting expectations Washington will act quickly on its fiscal stimulus package. Spot gold was at $909.60/911.60 an ounce at 1524 GMT, against $913.75 late in New York on Thursday. In the immediate wake of the data it jumped to a day high of $919.30.
US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange were up $1.20 to $914.80 an ounce. "The outlook for the fiscal stimulus package is a factor to keep an eye on," said Peter Fertig, consultant to Dresdner Kleinwort, the investment banking division of Dresdner Bank. "It might be negative for gold if people expect the economy is getting back on track again," he added.
The US Senate was due to resume debate on a $937 billion stimulus plan later in the day, after abruptly calling a halt to a drive to forge a bipartisan agreement on Thursday night. US markets climbed on Friday on the back of hopes for the administration's fiscal stimulus plan, while European shares remained higher. "With the rise in stock markets, some investors just took profits in gold and went back into stocks," said Fertig.
US employers slashed 598,000 jobs in January, the deepest cut in payrolls in 34 years, as the national unemployment rate shot up to 7.6 percent, according to the Labour Department. Gold has held firm over $900 an ounce for much of the week, benefiting from a flight to safety among fund investors spooked by volatility in other asset prices, while falling interest rates are reducing the opportunity cost of holding bullion.
"When you have central banks reducing the cost of money, it makes sense for funds to move into the alternative to money, and that is gold," CMC Markets strategist Ashraf Laidi said. ETFs, which issue securities backed by gold bullion, have proved popular with investors seeking the safety of precious metals without the drawbacks of holding coins or bars.
The SPDR Gold Trust, the world's largest exchange-traded fund, said its bullion holdings rose to a record 867.19 tonnes that day. Barclays Capital analyst Suki Cooper said ETF buying in January had helped pick up the slack from falling jewellery sales, and noted that the precious metal had defied fresh strength in the dollar to rise. "Investors are drawing on the wider economy as a reason to invest in gold," she said.
The usual key external drivers of gold, the dollar and oil, have become less influential as risk aversion has increased. The dollar slipped to session lows against the euro on Friday after the payrolls data, while oil slipped nearly 5 percent to below $40 a barrel. Among other precious metals, silver firmed to $12.94/13.02 an ounce against $12.84.
Platinum edged up to $989.50/999.50 from $973. Palladium rose more than 5 percent to a high of $212 an ounce, boosted by interest in the precious metal from long-term investors and buying of exchange-traded funds.
Zurich Cantonal Bank (ZKB) said on Friday it bought 6,365 ounces of metal to back its palladium exchange-traded fund on February 5, bringing its total holdings to 532,000 ounces. The latest rise means ZKB's palladium ETF holdings have risen 15,900 ounces or 3 percent since January 22. Palladium was later at $207/212 an ounce against $200.50.