Gold set for first weekly gain in five as US jobs data weakens rate hike bets

Gold rose more than 1% on Friday and headed for its first weekly gain in five weeks, as weaker-than-expected US jobs data reduced expectations of further Federal Reserve rate hikes.

Spot gold was up 1.4% at $4,179.42 per ounce by 0744 GMT, after earlier touching its highest level since June 23. US gold futures for August delivery gained 1.6% to $4,191.90.

Bullion was on track for a weekly gain of 2.2%, its first since the week ended May 29.

The move followed US labour market data showing that nonfarm payrolls rose by 57,000 in June, well below the 110,000 expected by economists in a Reuters poll.

The weaker jobs reading, along with softer private payrolls data, eased concerns over inflation and prolonged higher interest rates.

Traders now see around a 54% chance of a September rate hike, down from 66% before the data, according to CME FedWatch.

Higher interest rates usually weigh on gold because the metal does not offer a yield, making interest-bearing assets more attractive.

The dollar was also headed for a weekly decline, making dollar-priced gold cheaper for buyers using other currencies.

OANDA senior market analyst Kelvin Wong said the move reflected reduced pricing of Federal Reserve rate hikes for the rest of this year and the first quarter of next year after weak labour market data.

However, Wong said rate hike expectations had not fully disappeared and gold could still come under pressure later in the year, with prices potentially moving towards $3,500 an ounce.

The World Gold Council said central banks returned to buying in May, with official gold reserves increasing by a net 41 tonnes during the month, based on the latest reported data.

Other precious metals also rose. Spot silver gained 2.9% to $62.80 per ounce, platinum increased 2.8% to $1,661.61 and palladium climbed 1.1% to $1,281.42.

All three metals were near their highest levels in more than a week and were also headed for weekly gains.