Gold rose 1 percent to a seven-week high on Monday, climbing for the second straight session after U.S. jobs rose at the slowest pace in more than a year, fueling expectations the U.S. Federal Reserve could postpone an anticipated rate increase.
Nonfarm payrolls rose 126,000 last month, less than half February's pace and the smallest gain since December 2013, the Labor Department said on Friday. The data pushed the U.S. dollar lower, making dollar-denominated gold cheaper for holders of other currencies.
That data could prod the U.S. central bank to delay a rate increase that analysts had expected to come in June or September amid signals from the Fed it was ready to tighten monetary policy in view of a strengthening labor market.
"I think people are feeling comfortable being long gold after the payrolls data," said Yuichi Ikemizu, branch manager at Standard Bank in Tokyo.
Spot gold was up 0.6 percent at $1,218 an ounce after hitting a session high of $1,224.10. U.S. gold for June delivery climbed $17.70 to settle at $1,218.60 an ounce, the highest since February 13.
A delay in the first U.S. rate increase since 2006 would burnish gold's draw as a safe-haven asset.
Eli Tesfaye, senior market strategist for RJO Futures in Chicago, said market participants are now expecting a rate increase to be made in September or later this year.
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"The sentiment is changing so they're probably going to be forced to push interest rates further down the road if the numbers are not looking as good, so you get interest buyers coming in to push the market," Tesfaye said, noting short-covering.
Technical buying also lifted prices above $1,200, Tesfaye said.
The Fed may postpone its rate hike after Friday's employment report, said Mizuho Bank. "What's more, it implies that the pace of tightening may be more gradual," the bank said in a note.
Financial firm Markit said its final reading of its Purchasing Managers Index for the services sector rose to 59.2 in March from 57.1 in February, the highest since August and was above the preliminary, or "flash," reading of 58.6.