Gold edges lower on profit-taking before U.S. jobs data

By Peter Hobson

LONDON (Reuters) - Gold edged lower on Friday as some investors took profits ahead of U.S. payrolls data at 1230 GMT that will provide clues on the pace of U.S. interest rate rises.

But demand for gold as a perceived safe investment remained strong because of tensions over North Korea and political turmoil in the United States, keeping prices near 9-1/2-month highs.

The U.S. payroll numbers follow weak U.S. inflation data on Thursday that reduced expectations of an interest rate increase this year and pushed gold prices higher.

Gold is sensitive to interest rates because higher rates raise bond yields, making non-yielding bullion less attractive, and tend to boost the dollar, in which gold is priced.

Economists polled by Reuters expect a payrolls increase of 180,000 jobs in August.

Spot gold was down 0.1 percent at $1,320.04 an ounce by 1159 GMT. That was still close to Tuesday's peak of $1,325.94 -- the highest level since Nov. 9 -- and set for a weekly gain of 2.3 percent.

U.S. gold futures were up 0.2 percent at $1,325.40.

Gold is 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.

Brinkmanship over debt negotiations could easily tip over into loss of market confidence in the U.S. dollar, Butler said.

The dollar has weakened for six consecutive months, supporting gold by making it cheaper for holders of other currencies. The dollar weakened slightly on Friday, while U.S. bond yields and global stocks edged higher.

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

On the technical side, Fibonacci support for gold was at $1,297.50, said analysts at ScotiaMocatta. But gold had upward momentum and is likely to rise through resistance at $1,326.20 towards $1,350, they said.

Butler said that a continued push higher could see gold reach last year's peak of $1,374.91.

"The breakout pattern now evident on the charts will likely gain further traction, drawing in more quant-based funds," said INTL FCStone analyst Edward Meir.

Silver was down 0.2 percent at $17.54 an ounce but remained on track for a weekly gain of 2.9 percent.

Platinum gained 0.5 percent to $1,000.30 while palladium advanced 0.8 percent to $940.75.

(Additional reporting by Arpan Varghese in Bengaluru; Editing by Dale Hudson and David Goodman)