NEW YORK: Gold rose around 1 percent on Friday as the dollar slid and equities rallied after an increase in the US unemployment rate in July kept prospects of further Federal Reserve monetary stimulus on the table.
The metal was on track for its biggest weekly drop in six weeks, after the Fed earlier this week did not hint about imminent stimulus, but instead said a new round of major support could be on the way if the recovery did not pick up.
Bullion accelerated gains after the data showed US employers hired the most workers in five months, snapping three straight months of slow job growth. The report sparked a 2 percent rally on Wall Street and commodities gains across the board led by crude oil.
US unemployment rate, however, rose to 8.3 percent in July from 8.2 percent in June, which boosted gold buying due to hopes of Fed action in the near future.
Market watchers said the Fed's easing tools include using newly created money to buy bonds in a bid to keep interest rates low, a process known as quantitative easing (QE).
"Even though the nonfarm payrolls beat the estimates, the unemployment rate also rose, so the odds for a QE are all the same," said Nicolas Berge, a hedge fund trader at Geneva-based Absolute Capital Group which invests in precious metals, commodities futures and currencies.
"The increasing expectation of central-bank actions is likely to help gold break above its recent trading range," Berge said.
Spot gold was up 0.9 percent at $1,604.10 an ounce by 1:55 p.m. EDT (1755 GMT).
US COMEX gold futures for December delivery were up $16.60 at $1,607.30. Trading volume was on track to finish below its normal pace, preliminary Reuters data showed.
Gold is poised to drop over 1 percent this week. It has erased most of the gains it made after European Central Bank ECB President Mario Draghi boosted the euro last week by pledging to do whatever necessary to support the single currency.
Among other precious metals, silver, platinum and palladium all rose on gold's coattails and after CME Group cut their margins after the close of business on Monday.
Silver gained 2.4 percent to $27.75 an ounce. CME has cut its margins three times since February.
Platinum was up 2.3 percent at $1,408.99 an ounce, while palladium 2.1 percent at $577.25 an ounce.
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