Gold edges lower ahead of U.S. payrolls data

By Jan Harvey

LONDON (Reuters) - Gold eased on Friday as some buyers cashed in gains after its biggest quarterly rise in nearly 30 years, but moves were muted ahead of U.S. payrolls data which will be closely watched for its implications for Federal Reserve policy.

Spot gold was $1,228.50 an ounce at 1137 GMT, down 0.2 percent, while U.S. gold futures for June delivery were down $4.70 an ounce at $1,230.90.

The metal is sensitive to moves in U.S. rates, as a rise would lift the opportunity cost of holding non-yielding assets like bullion, while boosting the dollar.

Gold has risen 1.4 percent this week after Fed Chair Janet Yellen said the U.S. central bank should proceed only cautiously with further interest rate increases.

"Yellen said the Fed would be very (cautious) when it comes to new interest rate hikes. That was a signal for the market to go up," LBBW analyst Thorsten Proettel said. "I don't think the market has to fear big interest rate hikes in 2016 from the Fed. Overall monetary policy will be very supportive for gold."

Prices rallied more than 16 percent in the quarter to end March as expectations faded that the Fed would quickly press ahead with rate hikes this year after their first increase in nearly a decade in December.

Gold edged below $1,230 an ounce on Friday, but was held in a narrow range by uncertainty ahead of the payrolls numbers. A weak reading could further allay expectations for near-term Fed action to tighten monetary policy.

Payrolls are expected to have risen by 205,000 last month, according to a Reuters poll.

"A number above 200,000 new net jobs could weigh on gold and clip recent gains," HSBC said in a note. "But it would take a very good jobs number - and maybe a change in market sentiment regarding a likely April rate hike - to send gold back down to anywhere near the $1,200 level, we believe."

European shares fell more than 2 percent ahead of the data, while the dollar retreated versus the euro.

Physical gold demand in the major Asian markets of China and India has been soft this week due to rising prices, traders said. India's gold demand in the March quarter is set to drop by about two-thirds from a year ago to its lowest in seven years.

Silver was down 0.6 percent at $15.30 an ounce, while platinum was up 0.5 percent at $977.06 an ounce and palladium was up 0.7 percent at $567.50 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Susan Fenton and Susan Thomas)