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PRECIOUS-Gold rises as weak U.S. job data rekindles Fed stimulus hope

Frank Tang and Clara Denina
Friday, 7 Feb 2014 | 1:53 PM ET

* Gold on track for best weekly gain in five weeks

* U.S. nonfarm payrolls rise 113,000 in January

* U.S. equities rally keeps bullion from rising further

(Adds dealer comment, updates prices, adds NEW YORK to dateline) NEW YORK/LONDON, Feb 7 (Reuters) - Gold rose on Friday after data showed U.S. job creation slowed sharply over the past two months, fueling speculation that slowing economic momentum will force the Federal Reserve to keep its current stimulus. For the week, gold was up 1.5 percent, on track for its largest weekly gain in five weeks, boosted by safe-haven demand driven by tumbling currencies and assets in emerging markets. On Friday, however, bullion failed to retain stronger gains after U.S. nonfarm payrolls rose only 113,000 last month after a meager 75,000 gain in December. The metal's gains were limited because of a 1 percent rally in the S&P 500 equities index as expectations of further economic strength more than offset the weak reading on the labor market which was partly blamed on the weather, analysts said. "The payroll numbers are certainly weak, and I don't think the Fed can afford to change its current monetary stimulus policy," said Frank McGhee, head precious metals dealer at Chicago commodities brokerage Alliance Financial LLC. "Gold's gains are hanging on hopes that the Fed will back off from tapering, but it is still vulnerable to a sell-off in the near term," McGhee said. Spot gold rose as much as 1.2 percent to $1,271.70 an ounce, near its two-month high, after the job data. It was up 0.3 percent at $1,261.86 an ounce by 1:20 p.m. EST (1820 GMT) U.S. COMEX gold futures for April delivery were up $4.60 at $1,261.80 an ounce, with trading volume on track to finish below its 250-day average, preliminary Reuters data showed. Last week, the Fed decided to trim its bond purchases by another $10 billion as it stuck to a plan to wind down its extraordinary economic stimulus despite recent turmoil in emerging markets. Gold prices have risen around 5 percent since the beginning of the year, as investors continue to regard recent mixed economic data in the United States and emerging-market turmoil as insufficient to derail the global recovery.

Prices at 1:20 p.m. EST (1820 GMT)

LAST NET PCT YTD CHG CHG CHG US gold 1261.80 4.60 0.4% -24.7% US silver 19.940 0.000 0.1% -34.0% US platinum 1379.20 4.30 0.3% -10.4% US palladium 709.55 -0.80 -0.1% 0.9% Gold 1261.86 4.33 0.3% -24.7% Silver 19.93 0.02 0.1% -34.2% Platinum 1374.75 3.50 0.3% -10.6% Palladium 707.40 -0.35 0.0% 0.8% Gold Fix 1259.25 -0.75 -0.1% -24.3% Silver Fix 19.87 -27.00 -1.3% -33.7% Platinum Fix 1379.00 6.00 0.4% -9.5% Palladium Fix 711.00 3.00 0.4% 1.7%

(Additional reporting by A. Ananthalakshmi in Singapore; editing by David Evans, Dale Hudson and Matthew Lewis)