Picture: REUTERS
Picture: REUTERS

GOLD prices rose back above $1,700 an ounce on Friday after hitting a one-month low following better-than-expected US employment data, which boosted the dollar and tempered speculation over further US monetary easing measures.

A report showing US employment grew faster than expected in November boosted the dollar against the euro, lifted European stocks into positive territory and knocked German Bund futures.

Non-farm employment increased by 146,000 jobs last month, the Labour Department said on Friday, defying expectations of a sharp pull-back related to Superstorm Sandy.

Spot gold was down 0.2% at $1,701.60 an ounce at 2,39pm GMT, rebounding from a one-month low of $1,683.79, while US gold futures for December delivery were up $1.40 an ounce at $1,703.20.

"We’re retracing the losses from earlier. There was an opportunity to move on the lows," VTB Capital analyst Andrey Kryuchenkov said. "The dollar is still the biggest obstacle to gold... should the macro data continue to surprise to the upside, the Fed could reconsider what to do with easing."

The payrolls data was being closely watched ahead of a policy meeting of the Federal Reserve next week, at which the bank is forecast to announce a fresh round of Treasury bond purchases to maintain support for the weak US economy.

Many economists expect the US central bank to announce monthly bond purchases of $45bn after its policy gathering on December 11-12.

"(Today’s jobs data) doesn’t remove the need for stimulus but might convince the Fed to opt for a smaller program," BK Asset Management managing director Kathy Lien said.

Gold prices are still down 0.6% so far this week as uncertainty surrounding the US ‘fiscal cliff’, a $600bn package of tax hikes and spending cuts due to take effect in the new year, keeps buyers on the sidelines.

Gold etfs hit record highs

Investors’ appetite for physically backed funds held firm, with holdings of gold exchange-traded funds hitting record highs at 76.133-million ounces on Thursday.

Buyers in major gold consumer India took to the sidelines, however, as prices lifted from one-month lows.

"Demand is not very high today as prices have increased. In the festival (December) quarter there was some revival in demand," Mayank Khemka, managing director of Delhi-based wholesaler Khemka Group, said.

Gold imports from Hong Kong to China, vying with India as the world’s number one buyer, fell to 47.478 tons in October, data from the Hong Kong government showed on Friday, their lowest in ten months.

Silver was up 0.4% at $33.11 an ounce. Spot platinum was up 0.5% at $1,599 an ounce, while spot palladium was up 0.7% at $694.47 an ounce.

"Supply issues in South Africa have helped eliminate surpluses in all major platinum group metals markets," Morgan Stanley said in its 2013 Commodities Outlook. "We expect deficit markets to continue in 2013, with upside benefits for prices."

"Industrial demand remains firm, and supply is constrained by South African labour issues, reduced sales from Russian stocks and lower recycling rates," it said. "Among the PGMs, we believe fundamentals are better for palladium than platinum."

The platinum/palladium ratio, which measures the number of palladium ounces needed to buy an ounce of platinum, held near six-month lows at 2.31 as palladium outperformed, down from its 2012 high of 2.65 hit in October.

Palladium has been the best performer among the main precious metals this week, up 2.2%, against a 0.2% rise in platinum.

Its rise has taken it into overbought territory, however, with its 14-day relative strength index at 71.6, with any reading above 70 indicating overbought conditions.