Gold prices jumped on Friday after U.S. non-farm payrolls data missed expectations, curbing expectations that the Federal Reserve is set to start paring back its $85 billion monthly bond-buying programme.
The dollar fell against a basket of currencies after data showed U.S. job growth was less than expected in August and the unemployment rate dropped to a 4-1/2 year low as workers gave up their job search.
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That has tempered expectations the U.S. recovery is strong enough to allow the Fed to taper asset purchases as soon as this month. The central bank holds a two-day policy meeting on Sept. 17-18.
Gold leapt nearly 2 percent to a high of $1,392.46 an ounce in the immediate wake of the data, and was up 1.5 percent at $1,387.66 at 1252 GMT. Earlier it hit a low of $1,362.55, its weakest since August 22.
"The immediate response of gold and the other precious metals to today's NFP data has been predictable," Mitsui Precious Metals analyst David Jollie said. "They were worse than expected, and this suggests that tapering of America's quantitative easing programme could be further into the future than had previously been expected."
"As a result, precious metal prices have rallied on expectations of a little further QE, relatively loose monetary policy and potential for longer term QE-derived inflation."
U.S. gold futures for December stood at $1,388.20 an ounce, up $15.20.
The Fed's stimulus has been a major driver of gold's rally of recent years, 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 17 percent fall this year.
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.
SOUTH AFRICAN STRIKE ACTION ABATES
South Africa's National Union of Mineworkers said on Friday that most of the strikers in the republic's gold mining industry have agreed to return to work after accepting the latest wage offer from employers, though those from Harmony Gold remained on strike.
Gold futures in number one gold consumer India extended losses earlier on Friday to hit their lowest in nearly two weeks weighed by weak overseas leads, though physical traders awaited resumption of shipments.
India's central bank, in a bid to help the government stem the tide of gold imports which had pushed the current account deficit to a record high, told importers on July 22 that a fifth of their purchases would have to be turned around for export.
"The (physical) market is very quiet, we are expecting that a couple of consignments will get cleared next week," said Haresh Soni, chairman, All India Gems and Jewellery Trade Federation.
Spot silver was up 2.3 percent at $23.68 an ounce, tracking gold.
Spot platinum was up 1.3 percent at $1,498.49 an ounce, while spot palladium was up 2.1 percent at $699.75 an ounce.