Gold jumps around one percent after weak U.S. jobs report

By Clara Denina

LONDON (Reuters) - Gold rose around one percent on Friday after sharply weaker-than-expected U.S. jobs data supported the view that the U.S. Federal Reserve will take a gradual approach to tapering its bond-buying programme this year.

U.S. nonfarm payrolls rose just 74,000 in December, the smallest increase in nearly three years and far below the 196,000 forecast by economists. The unemployment rate fell 0.3 percentage point to 6.7 percent.

"This is a bad NFP release and has given gold a boost ... but one swallow does not make a summer and one bad NFP print doesn't change 12 months of gold-bearish macroeconomic news," Macquarie analyst Matthew Turner said.

"Gold has been on the firm side this year and this data helps support that but the effect is being moderated by the fact that the Fed has begun tapering," Turner added. "And so it would need a bigger shock to shift it from that course ... nobody is now thinking the U.S. economy is near collapsing."

Spot gold rose as much as 1.4 percent to a session high of $1,244.90 an ounce, and was up 1.3 percent to $1,243.40 by 1453 GMT. Prices were headed towards their third consecutive week of gains, up around 0.3 percent.

U.S. gold futures for February delivery were up 1.1 percent to $1,242.80 an ounce.

The U.S. central bank last month announced a $10 billion cut to its $85 billion in monthly asset purchases.

Non-interest-bearing gold, which had been boosted by central bank liquidity and a low interest rates environment, lost 28 percent of its value in 2013. The fall ended a 12-year bull run, as signs of improving U.S. economic conditions led the Fed to reconsider the validity of its monetary stimulus, prompting investors to shift money to equities.

The dollar fell 0.3 percent against a basket of currencies after the U.S. jobs report, further easing from a seven-week high and making dollar-denominated gold less expensive for holders of other currencies.

LOW PRICE FORECASTS

Analysts' forecasts remain subdued and expectations are mostly for another drop in gold prices this year. Bank of America Merrill Lynch cut its 2014 average price forecast to $1,150, citing an uncertain macro-economic environment and lack of investment demand.

Barclays said it expected gold prices to average $1,205 an ounce in 2014, mostly due to a macro backdrop of modest growth, fewer tail risks, and a stronger dollar increasing the scope for further disinvestment.

In the physical market, trading volumes for 99.99 percent purity gold contract on the Shanghai Gold Exchange rose to over 16 tonnes from Thursday's 13 tonnes, while premiums climbed to $19 from $17.

Silver extended its gains to reach $20.06 an ounce, up 2.7 percent. Spot platinum was up 0.8 percent at $1,417.50 an ounce, while palladium rose 0.2 percent at $734.22 an ounce.

Chinese passenger vehicle sales in December 2013 were 1.8 million units, up 21.5 percent year on year, data released on Thursday by CAAM showed.

Rising Chinese car sales should be good for palladium demand, as the metal is used in the exhaust catalysts of almost all Chinese cars.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy and David Evans)