Gold surged more than 2 percent and was on track for its biggest one-day jump in seven weeks on Friday after U.S. payrolls data fell well short of forecasts, boosting expectations that the Federal Reserve will stand pat on interest rates.
The U.S. economy created the fewest jobs in more than five years in May, a Labor Department report showed. That could make it difficult for the Fed to raise interest rates further. The data sparked a rebound in gold, which had slid to a 3-1/2 month low of $1,199.60 on Monday on growing expectations for a hike.
"The climate for gold to go higher ... was certainly set because this pretty sharp drop in bond yields, along with the pull-back in the U.S. dollar and declining equities created a good combination for the gold market to go higher," said James Steel, chief metals analyst for HSBC Securities in New York. U.S. and European shares, the dollar, oil and bond yields dived after the U.S. job data.
"The sharp drop in non-farm payrolls is negative for the dollar and positive for gold," ABN Amro analyst Georgette Boelesaid. "Expectations for a rate hike soon have clearly diminished ... Precious metals prices will fly higher."
Gold was on track to rise 2.3 percent this week, following four straight weeks lower after comments from senior U.S. central bank officials, including Fed Chair Janet Yellen, boosted expectations of an imminent rate rise.
Gold is highly sensitive to U.S. rate expectations, as rising rates lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Gold demand in Asia, home to the world's biggest consumers of physical gold, was muted this week as a slight increase in India and Japan was offset by reductions in other trading centers as buyers awaited further price declines.
Among other precious metals, spot platinum was up 3.1 percent at $983.04 an ounce after touching its lowest since April 8 at $950 an ounce. It was on track for its first firm week in four.