Gold gave up initial gains on Friday, but was still headed for a weekly rise after an increase in the U.S. unemployment rate boosted bets on a pause in the Federal Reserve's interest rate hikes.
Spot gold lost 0.05% to $1,938.79 per ounce. It was poised for a 1.2% weekly gain after prices touched one-month highs on Wednesday. U.S. gold futures for December delivery were higher 0.02% to $1,966.20.
U.S. manufacturing contracted for a 10th straight month in August, but the pace of decline continued to slow, data from the Institute for Supply Management (ISM) showed.
"The ISM report has reduced the gold rally to a range trade, likely between $1,920-1960, in the short term. The gold market may wait for more clues as to intentions at the Fed's September meeting, which will include a fresh set of dots," said Tai Wong, a New York-based independent metals trader.
U.S. bond yields and the dollar erased initial losses after the manufacturing data, further pressuring non-yielding bullion.
Gold also faced a technically motivated pullback after facing resistance around the $1,975 level, David Meger, director of metals trading at High Ridge Futures, said.
But capping non-yielding gold's declines, data released earlier in the session showing a rise in the unemployment rate and moderation in wage growth backed expectations that the Fed would not raise interest rates this month.
Bets on the Fed leaving rates unchanged in September rose to 93.0% from 89% before the jobs data, while bets of a pause in November rose to 64.0% from 55%, according to the CME Group's FedWatch tool.
Silver fell 1% to $24.19 per ounce, while platinum declined 0.66% to $961.19, and was set to post its second consecutive weekly gain. Palladium was up 0.95% at $1,226.23.