Gold on hold before U.S. data; heads for 2nd weekly loss

LONDON (Sept 6)   Gold steadied on Friday but was headed for a second week of losses as investors stayed cautious ahead of U.S. labour data that could help determine a timeline for the Federal Reserve tapering of its bond-buying programme.

The Fed's stimulus has been a major driver in a gold rally, as the metal benefitted from increased central bank's liquidity and a low interest rate environment.

But expectations that this could soon come to an end contributed to gold's 20 percent fall this year.

Gold was up 0.1 percent to $1,367.79 an ounce at 0931 GMT. It was however not far off Thursday's low of $1,364.91, its weakest since August 22, and was on course to lose 1.9 percent for the week.

U.S. gold futures for December stood at $1,368.80 an ounce, down $4.10.

The non-farm payrolls report at 1230 GMT will be scrutinised for clues on whether the U.S. recovery is strong enough to allow the Fed to move to taper asset purchases as soon as this month. The central bank holds a two-day policy meeting on Sept. 17-18.

The world's biggest economy is expected to have added 180,000 non-farm jobs last month, keeping the unemployment rate steady at 7.4 percent, according to a Reuters survey.

Expectations for a robust number have been mounting in recent days in light of encouraging U.S. economic data, particularly the non-manufacturing ISM.

"This morning you have some standstill after yesterday's fall because markets are waiting for non-farm payrolls this afternoon," ABN Amro analyst Georgette Boele said.

"If the NFP come in better than expected, you will see lower gold prices also because of expectations that the Fed will start tapering later this month."

However, a softer-than-expected report would likely trigger a relief rally in gold, analysts said.

Gold rose to a 3-1/2 month high of $1,433.31 an ounce in late August on safe-having buying after the United States and its allies looked close to launching an imminent military strike on Syria.

But prices retreated after Britains's parliament voted against any involvement and President Obama decided to seek congressional approval, while facing increasing pressure from Russia's Vladimir Putin and other world leaders.

PHYSICAL DEMAND

The physical sector saw buying interest from leading consumer India as jewellers there expected a surge in imports from next week after the government clarified overseas buying rules.

"We've sold a small quantity of gold to those who still have the permits to import. But that has no impact on premiums and we are still quoting gold bars at $1 to $1.50 premiums," a Singapore dealer said.

Gold is one of the biggest items in a record current account deficit that has helped push the rupee to an all-time low. New Delhi has raised the import duty on gold to an all-time high of 10 percent last month.

Spot silver was unchanged at $23.16 an ounce.

Spot platinum stood also flat at $1,478.99 an ounce, while spot palladium was up 0.3 percent at $686.47 an ounce.