Gold at near 10-month high after U.S. jobs growth slows

By Marcy Nicholson and Peter Hobson

NEW YORK/LONDON (Reuters) - Gold rose to the highest in nearly 10 months on Friday after U.S. job growth slowed more than expected in August, but pared gains when investors judged that the figures were unlikely to change the outlook for U.S. interest rate rises.

Spot palladium prices made their biggest one-day surge since March 2016 and reached the highest price in 16-1/2 years after some U.S. automakers reported better-than-expected August sales and as demand was expected from Houston to replace flood-damaged vehicles after Hurricane Harvey.

Spot gold was up 0.2 percent at $1,324.46 an ounce by 1:59 p.m. EDT (1759 GMT) after reaching $1,328.80, the highest since Nov. 9. It was set for a weekly gain of 2.6 percent.

U.S. gold futures settled up 0.6 percent at $1,330.40. On Monday, the U.S. metals futures markets will shut early for the U.S. Labor Day holiday.

Data showed U.S. job growth slowed more than expected, but the pace of gains should be more than enough for the Federal Reserve to announce a plan to start trimming a massive bond portfolio accumulated.

The dollar index and bond yields initially weakened sharply following the jobs data but turned higher. [FRX/] [US/]

"Investors have been looking for a hedge against many ... risks," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

"Pick your poison: trade, geopolitics, thermonuclear, debt ceiling."

Gold is still likely to rise further after prices increased by 4.1 percent in August, the biggest monthly gain since January, said Mitsubishi analyst Jonathan Butler.

"The technical uptrend is well established, there is continuing uncertainty over North Korea's nuclear ambitions and an imminent wrangle between Congress and the White House over the debt ceiling that must be solved by late September to avoid technical default," he said.

Adding to geopolitical concerns, the United States on Thursday told Russia to close a consulate, worsening a diplomatic spat.

Spot palladium was 5.2 percent higher at $982 an ounce, the highest since February 2001.

"Palladium stormed 5 percent higher as speculators bought aggressively anticipating heavy demand to replace vehicles destroyed by Hurricane Harvey in a thin pre-holiday market in New York," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

"The platinum/palladium ratio at 1.0250 is the closest it has been to par in 16 years."

Platinum was up 1.1 percent to $1,006, after rising to a six-month high at $1,009.

Silver was up 0.6 percent at $17.67 an ounce, after rising to the highest since early June at $17.75.

(Additional reporting by Arpan Varghese in Bengaluru; Editing by Pritha Sarkar and Alistair Bell)