Gold Up 1% on Dollar, Stocks Ahead of Payrolls

Getty Images

Gold rose around 1 percent on Thursday, as the dollar's sharp drop and worries about an oversold equities market prompted investors to add positions in the safe-haven metal ahead of Friday's all-important nonfarm payrolls report.

After trading mostly flat earlier in the session, bullion suddenly turned higher at midday during the New York session as the dollar extended losses to plunge 3 percent versus the yen and down 1.5 percent against the euro.

Some investors sold the greenback on worries that upbeat U.S. jobs data would lead to a reduction of the Federal Reserve's stimulus program. Similar worries also weighed down on Wall Street.

(Read More: Why Gold Bulls Have the Edge: Pro)

Recent U.S. data has been inconsistent at best, however, economists said.

(Read More: Why Gold Bulls Have the Edge: Pro)

"We are starting to see investors being nervous about holding equities at these level going forward, so you are going to see money flow back into the safe-haven markets," said Tom Power, senior commodities traders at futures brokerage R.J. O'Brien.

Spot gold climbed 0.9 percent to $1,415 an ounce, off a three-week high at $1,423.16 an ounce set earlier in the session.

U.S. gold futures gained $17.30 to settle at $1,415.80 an ounce.

(Read More: Indian Restrictions Hit Gold; Dollar Strengthens)

U.S economic data has been in the spotlight since Fed Chairman Ben Bernanke said last month the central bank would taper off monetary stimulus — it is currently purchasing bonds for $85 billion a month — if the U.S. housing and job markets showed continued strengthening.

(Read More: Indian Restrictions Hit Gold; Dollar Strengthens)

The number of Americans filing new claims for unemployment benefits fell last week, pointing to moderate job growth despite slowing economic activity.

Holdings of SPDR Gold Trust, the largest gold-backed ETF, held steady on Wednesday after falling 0.3 percent in the previous session. Holdings are at four-year lows.

Among other precious metals, silver gained 0.5 percent to $22 an ounce, platinum climbed 1 percent to about $1,525 an ounce, while palladium rose 0.3 percent to $758 an ounce.