Gold steady, seen vulnerable after strong U.S. jobs data

London (July 4)   Gold edged up on Friday, gaining some traction from weaker European shares, but was vulnerable to further losses after falling in the previous session as strong U.S. jobs data lifted the dollar, denting gold's investment appeal.

U.S. employment growth jumped in June and the jobless rate closed in on a six-year low, providing decisive evidence of brisk economic growth heading into the second half of the year.

The data was published a day earlier than usual due to the July 4 Independence Day holiday, which will curb volumes trading throughout the session.

The data stoked fears that the U.S. Federal Reserve could hike interest rates earlier than expected.

"The market is going from data point to data point to assess the policy of the Fed ...and you now have some hawkish members indicating that rate hikes might already take place at the end of the first quarter next year, which will be negative for gold," Quantitative Commodity Research director Peter Fertig said.

Spot gold was up 0.1 percent at $1,321.15 an ounce at 1008 GMT. It fell 1.2 percent to a one-week low of $1,309.64 after the U.S. nonfarm payrolls release on Thursday, but managed to claw back losses as the market expects more macro signs on the strength of the global economy, traders said.

U.S. gold futures for August delivery were up by the same margin at $1,322.50 an ounce.

"Gold did well to hold above $1,310 after the good employment numbers, but it remains somewhat of a concern that there seems to be a wall of selling every time we try a convincing push above $1,330," MKS Group said in a note.

"Overall, it feels like the shorts might be gaining momentum over the longs but think we will remain in consolidation mode $1,310-$1,330 for the next couple of sessions as this week's data sinks in."

The dollar rose 0.1 percent against a basket of main currencies, holding just below a one-week peak, while European shares edged lower as investors took the opportunity to lock in profits after the biggest week of gains since March.

A stronger U.S. currency makes dollar-denominated assets like gold more expensive for foreign investors.

But gold still looked set to post its fifth straight weekly gain, although a small one, as geopolitical tensions in the Middle East and Ukraine supported prices at the start of the week.

In other precious metals, palladium was up 0.3 percent at $857.65 an ounce. It climbed for a ninth straight day on Thursday, hitting a 13-year high of $864.45. Platinum rose 0.2 percent to $1,496.50 an ounce.

Palladium, which along with platinum is used in catalytic converters in vehicle engines, was boosted by data earlier in the week that U.S. auto sales hit an eight-year high in June.

Strong demand from the auto industry and worries about supply after a five-month strike in major producer South Africa were pushing up prices, traders said.

Silver stood up 0.1 percent to $21.09 an ounce.

Source: Reuters