Gold futures trim losses after US jobs report beat

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Gold slipped sharply on Friday after stronger than expected U.S. payrolls data for June but rebounded quickly, underpinned by concerns over the outlook for financial markets after Britain's Brexit vote.

U.S. gold futures for August delivery, which fell as low as $1,336.30 an ounce in the wake of the jobs data, settled down $3.70 at $1,358.40 and were last up $5.50 at $1,367.20.

Spot gold was trading up 0.46 percent at $1,366.40 an ounce, after it hit a low of $1,335.68 an ounce in the wake of data.

"What we had was very much knee jerk reaction, which is very normal for the US NFP data," wrote Naeem Aslam, chief market analyst at Think Markets UK. "As dust clears out and investors look through it, it becomes clear that we are still in a very messy environment and if even one of the major economic data due next week prints a lower reading, this positive optimism may fade away faster than you think."

The U.S. created 287,000 jobs in June, massively topping analyst expectations.

The national unemployment rate rose slightly more than expected in June, to 4.9 percent, according to the Bureau of Labor Statistics.

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Jobs watchers had been expecting Friday's jobs report to show a substantial rebound from May's unexpectedly weak growth, but the June number easily topped expectations.Economists surveyed by Reuters said they were, on average, expecting nonfarm payrolls to show growth of 175,000 for June, and the unemployment rate to rise to 4.8 percent.

That sent the dollar to a two-week high against the euro and reignited talk that the Federal Reserve will lift interest rates this year. Fed futures contracts, which suggested before the jobs report that traders saw only a 19 percent chance of a U.S. rate hike by December, now suggest a higher chance.

Gold is sensitive to higher rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced. Immediately following the report, gold had traded about 1 percent lower, before briefly rebounding into positive territory.

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"A very strong jobs figure will trigger some short term pain for gold, however, the underlying uptrend should prevail in the medium term," MKS Group trader James Gardiner wrote in a note ahead of the report.

as small businesses ramped up hiring, and fewer Americans applied for unemployment benefits last week.

"This also confirms that traders have paid more attention to unemployment number which ticked higher and this is building the case for them that the Fed will only be able to raise the interest rate only once this year, if that," Aslam wrote in a research note.

Investors poured the most money into U.S.-based funds invested in precious metals since February, adding $2 billion to in the latest week, data from Thomson Reuters' Lipper service showed on Thursday.

Technical analysts at ScotiaMocatta pegged support for gold at $1,346 and resistance at $1,375.30, with the RSI (relative strength index) currently showing the yellow metal in slightly overbought territory and added that profit-taking may emerge in the short-term.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.42 percent to 978.29 tonnes on Thursday from 982.44 tonnes on Wednesday.

—CNBC's Everett Rosenfeld contributed to this report.