Gold rose 1 percent on Friday a day after touching a six-week low as US payrolls data missed expectations, dampening talk of an early interest rate rise by the Federal Reserve and pressuring the dollar. A string of upbeat reports on the US economy, including signs of an improving job market, helped gold to its biggest monthly loss this year in July, with prices falling 1 percent on Thursday.
They clawed back lost ground, however, after data showed US job growth slowed more than expected last month and the unemployment rate rose, pointing to some slack in the labour market that could give the Fed room to keep interest rates low.
That would keep the opportunity cost of holding gold versus higher-yielding assets low.
Spot gold was up 1 percent at $1,294.10 an ounce at 1347 GMT, off Thursday's six-week low of $1,280.76. US gold futures for December delivery were up $12.30 an ounce at $1,295.10.
Data released on Friday showed nonfarm payrolls increased 209,000 last month after surging by 298,000 in June, while the unemployment rate edged up to 6.2 percent from 6.1 percent.
"Yesterday there were some thoughts that interest rates might rise more quickly, and that's what hit gold," Macquarie analyst Matthew Turner said. "But then today, people were looking for a big payrolls figure and they didn't get one, so gold gained."
European stocks, which had fallen to 3-1/2 month lows in earlier trade, recovered some losses after the numbers, while Wall Street equities opened only marginally lower.
The dollar index hit session lows after the numbers, retreating further from the previous day's 10-1/2 month low.
"Gold and the US dollar have a strong historical negative correlation, as bullion is most frequently priced in dollar terms," HSBC said in a note. "Expectations for a stronger dollar may keep a lid on gold prices in the near to medium term."
Demand for physical gold in Asia failed to pick up in a robust way despite the price drop on Thursday, a dealer in Hong Kong said.
Metals consultancy GFMS, a division of Thomson Reuters, warned on Thursday that buying in the main physical gold markets of China and India may not be strong enough to provide a floor for prices this year.
"Strong physical demand from Asia, especially China, arguably supported gold prices from falling further last year," GFMS analyst Sara Zhao told the Reuters Global Gold Forum.
"Weaker Chinese physical demand for the rest of the year would see the gold price influenced more by Western investors' sentiment, which fluctuates majorly by macro and geopolitical conditions."
Sales of American Eagle gold coins by the US Mint dropped about 40 percent in July from a year earlier.
Gold prices remain up 6.6 percent this year, but the bulk of those gains were made in the first quarter. The metal fell 3.4 percent in July, its biggest monthly drop of 2014.
In other precious metals, silver was up 0.7 percent at $20.46 an ounce, while spot platinum was up 0.4 percent at $1,460.25 an ounce and spot palladium was up 0.3 percent at $869.35 an ounce.