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Gold touches 9½-month high after US jobs growth slows

Key Points
  • Gold surged higher as investors reacted to U.S. jobs data.
  • Safe-haven demand remained as tensions over North Korea lingered.
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Gold touched a 9½-month high on Friday after data showed U.S. job growth slowed more than expected in August, but reversed gains when investors judged that the figures were unlikely to change the outlook for U.S. interest rate rises.

Spot gold was up 0.22 percent at $1,323.97 an ounce after reaching $1,328.80, the highest since Nov. 9. It was still set for a weekly gain of 2.3 percent.

U.S. gold futures for December delivery gained 0.62 percent to settle at 1,330.40, its highest settle since Sept. 27 when it ended the day at $1,330.40, and the fifth positive session in the last six. In midday trading gold hit a high of $1,334.50, its highest level since Nov. 9 when it traded as high as $1,338.30.

The U.S. Labor Department said nonfarm payrolls increased by 156,000 last month and average hourly earnings rose three cents or 0.1 percent. The figures missed economists' forecasts but analysts were divided on how they would affect Federal Reserve policy on interest rate rises.

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Gold is sensitive to interest rates because higher rates raise bond yields, making non-yielding bullion less attractive, and tend to boost the dollar, in which gold is priced. The dollar and bond yields weakened sharply following the jobs data but recouped losses.

Gold is still likely to rise further after prices increased January, said Mitsubishi analyst Jonathan Butler.

"The technical uptrend is well established, there is continuing uncertainty over North Korea's nuclear ambitions and an imminent wrangle between Congress and the White House over the debt ceiling that must be solved by late September to avoid technical default," he said.

Brinkmanship over debt negotiations could easily tip over into loss of market confidence in the U.S. dollar, Butler said, supporting gold by making it cheaper for holders of other currencies. Adding to geopolitical concerns, the United States on Thursday told Russia to close a consulate, worsening a diplomatic spat.

On the technical side, Fibonacci support for gold was at $1,297.50, said analysts at ScotiaMocatta. But gold had upward momentum and is likely to rise through resistance at $1,326.20 towards $1,350, they said.

Butler said that a continued push higher could see gold reach last year's peak of $1,374.91.

"The breakout pattern now evident on the charts will likely gain further traction, drawing in more quant-based funds," said INTL FCStone analyst Edward Meir.

Silver rose 0.78 percent to $17.70 an ounce and was on track for a weekly gain of 3 percent. Platinum was up 1.25 percent to $1,007.40 and palladium was 5 percent higher at $979.50.