Gold Retreats With Euro Ahead of Payrolls Data

(Reuters) - Gold prices eased on Friday, tracking losses in the euro versus the dollar ahead of key U.S. jobs data, but remained on track for their biggest weekly gain since late April as risk-averse investors recovered their appetite for the metal.

Spot gold was bid at $1,527.66 an ounce at 1154 GMT against $1,531.85 late in New York on Thursday. U.S. gold futures for August delivery eased $2.30 to $1,528.30.

 

Worries over the financial health of some euro zone economies, chiefly Greece and Portugal, and over an upcoming discussion of extending the U.S. debt ceiling have tempered risk appetite across financial markets this week, lifting gold.

 

"If you look at the euro zone situation, that is still there, and a lot of European investors would still like more diversity than just holdings euros," said Mitsui & Co Precious Metals analyst David Jollie. "That can be a risk aversion thing rather than a view that gold will appreciate in price."

The cost of insuring Greek and Portuguese government debt against default rose on Friday, due to ongoing uncertainty over a second bailout package for Greece.

 

The euro eased, pressuring gold from two-week highs, after bouncing in the previous session after ECB President Jean-Claude Trichet said the central bank would relax rules and continue to provide liquidity to Portugal.

 

The financial markets are expected to remain quiet ahead of U.S. non-farm payrolls data at 1230 GMT, which is seen as an important indicator of the health of the U.S. economy. Payrolls are expected to rise by 90,000, according to a Reuters survey conducted last week, from 54,000 in May.

 

U.S. jobless claims and private employment data on Thursday fueled expectations the economy was bouncing back from a recent soft patch in the United States. A strong payrolls number could weigh on gold.

 

"Data indicating economic growth are generally bearish for gold, as it also encourages higher interest rates," HSBC analyst James Steel said in a note.

 

OIL FALLS

 

Weakness in other commodities also pressured gold early on Friday. Brent crude prices fell more than $1 a barrel as investors cashed in the previous session's hefty gains, though it later recovered some lost ground.

 

Among other precious metals, silver was bid at $36.20 an ounce against $36.41. Spot platinum was bid at $1,745.50 an ounce versus $1,739.85, while spot palladium was at $780.97 an ounce against $781.55.

 

The platinum:palladium ratio -- the number of ounces of palladium needed to buy an ounce of platinum -- held at its lowest in more than four months at 2.23 on Friday.

 

Palladium became increasingly expensive compared to platinum earlier this year, with its ratio falling to 2.16 in February, an eight-year low. But it failed to sustain those gains as jitters over the health of the car industry dented buying interest in the metal, moving back to 2.5.

"From the lows in May, palladium rallied 17 percent while platinum climbed 6 percent, and during the pullback platinum dropped 10 percent, compared to palladium's 11 percent drop," said ScotiaMocatta in a monthly report.

 

"Both metals have, however, found good underlying buying interest and have formed 'V'-shaped rebounds off the lows."

 

"After significant price gains in both PGMs in anticipation of economic recovery, prices are now consolidating," it added. "Considering the extent of the gains and the fact recovery has slowed, prices could well correct further on the downside until demand recovers. Expect dips to be well supported."

 

(Reporting by Jan Harvey; Editing by Anthony Barker)