Gold dips as dollar gains on solid U.S. jobs data

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By Swati Verma

BENGALURU (Reuters) - Gold slipped on Friday as the dollar regained some ground on the back of strong U.S. jobs data, but the metal was still on track for a fifth week of gains.

Spot gold was down 0.1 percent at $1,232.02 per ounce by 11:56 a.m EDT (1556 GMT). U.S. gold futures were down 0.4 percent at $1,233.70 per ounce.

The dollar index gained after data showed U.S. job growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years.

"Strong data helped the dollar, which put some pressure on gold. The fact that the data is strong despite storm-related disruptions, suggests the economy is humming along strongly and that the Fed will continue to hike interest rates," said Tai Wong, head of metals trading at BMO.

Gold is sensitive to higher U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

"Given the fact that we had a very strong rally yesterday, we are going to struggle towards the $1,240-$1,245 highs off this move unless we get a sustained downward movement on the dollar," Wong said.

Gold jumped about 1.5 percent in the previous session as the dollar retreated sharply from a 16-month high.

World shares rallied on hopes that the United States and China were starting to repair their damaged trade relations. [MKTS/GLOB]

"People who would generally buy gold out of fear as a safe-haven are lightening up on it now. There's less of a reason to own it under that fear gauge," said Michael Matousek, head trader at U.S. Global Investors.

Attention is now turning to the U.S. congressional elections on Nov. 6, which will determine whether the Republican or Democratic party controls Congress, with some predicting increased market volatility on the outcome.

"The return of risk appetite could be a bearish sign for gold, given how it's benefited from its safe-haven status as of late," Craig Erlam, senior market analyst at OANDA in London, said in a note.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to their highest since late August on Thursday.

Among other precious metals, platinum climbed 1.6 percent to $869.80 per ounce, having touched its highest since June 25 at $870.80 earlier in the session. The metal was up over 4 percent for the week so far.

Palladium rose 2.2 percent to $1,117.00 per ounce and silver was up 0.5 percent at $14.81 per ounce.

(Reporting by Swati Verma and Karthika Suresh Namboothiri in Bengaluru; Editing by Phil Berlowitz and Tom Brown)