Gold edges back towards 2-1/2-week low after U.S. jobs data

By Jan Harvey

LONDON (Reuters) - Gold prices edged back towards their lowest since mid-August on Monday after U.S. payrolls data failed to provide clarity on the timing of a Federal Reserve rate hike, and as the dollar steadied against a currency basket.

Spot gold was down 0.2 percent at $1,120.50 an ounce at 1157 GMT, while U.S. gold futures for December delivery were down $1.00 an ounce at $1,120.40.

Spot gold ended last week down 1 percent after three straight days of decline, hitting its lowest in 2-1/2 weeks on Friday at $1,116.75 an ounce.

Friday's hotly anticipated non-farm payrolls report showed the U.S. economy added fewer jobs than expected last month, though the unemployment rate fell to its lowest since 2008.

"The number was too good for those who hoped that the Fed would postpone the rate hike, and too little for those who were hoping (they'd go ahead with) it. That's why on the gold side, the market just got stuck," Julius Baer analyst Carsten Menke said.

"As long as we know the U.S. is on a solid growth path, that there is no inflation problem, and that eventually there will be higher bond yields, this remains an environment which is not liked by the gold market."

Gold prices have fallen more than 5 percent this year, largely on expectations for a rise in U.S. interest rates, which would lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

The Fed has already indicated that the timing of a hike is largely data-dependent.

Bullion traders said uncertainty over the timing of a hike will keep gold under pressure until the Fed meet on Sept. 16-17.

"The first chance of (the Fed implementing a rate hike) will be at the Fed meeting next week. The uncertainty in this regard is likely to keep the gold price in check in the run-up to the meeting," Commerzbank said in a note.

Strength in equities also pressured gold, as investors plumped for assets seen as higher risk. The dollar steadied after dropping on mixed U.S. employment data.

Gold prices got little support with the resumption of trading in key gold consumer China. Premiums on the Shanghai Gold Exchange were steady at about $4 an ounce on Monday, indicating stable buying interest.

With the U.S. markets closed for the Labor Day holiday on Monday, trading is likely to be thin.

Among other precious metals, silver was down 0.5 percent at $14.50 an ounce, while platinum was down 0.4 percent at $985.50 an ounce and palladium was up 0.8 percent at $576.25 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Mark Potter)