Gold set for biggest weekly drop in two months ahead of U.S. payroll data

By Nithin ThomasPrasad

BENGALURU (Reuters) - Gold fell on Friday, set for its biggest weekly loss in two months, as investors sought higher returns from a firmer U.S. dollar and rising Treasury yields and awaited American non-farm payroll data later in the day.

"We are somewhat concerned about gold's ability to hold up and see more weakness that could set in, especially if Friday's payroll number sets off another spike in U.S. yields," INTL FCStone analyst Edward Meir said in a note.

Higher yields seem to be the prime negative driver in gold for the moment, he added. Dollar-denominated bullion typically loses value when the greenback and U.S. Treasury bond rates rise since the yellow metal does not bear interest.

Spot gold fell 0.3 percent to $1,220.55 per ounce at 0505 GMT. It has dropped 1.7 percent this week and is set for its biggest weekly decline since the week of May 5.

U.S. gold futures for August delivery fell 0.3 percent to $1,219.90 per ounce.

Silver was down 0.7 percent at $15.89 per ounce after hitting a 15-month low earlier during the session. It was down 4.1 percent this week.

Investors are looking ahead to the monthly U.S. employment data later on Friday after downbeat private payroll figures overnight pointed to some loss of momentum in job growth as the labor market nears full employment.

"The primary focus will be on the wage growth component given the Fed's overriding concern about inflation," said Stephen Innes, head of trading for Asia Pacific at OANDA in Singapore, adding "the G-20 summit should not be ignored."

U.S. President Donald Trump and Russian President Vladimir Putin are set to size each other up in person for the first time on Friday in what promises to be the most highly anticipated meeting on the sidelines of the G20 summit.

Spot gold may fall into a range of $1,204 to $1,211 an ounce, as suggested by its wave pattern and a Fibonacci projection analysis, according to Reuters technical analyst, Wang Tao.

"Gold has been weighed down by overall bearish sentiment toward the sector, with a spike higher in bond yields over the last fortnight contributing to the soft tone," said Jordan Eliseo, chief economist at gold trader ABC Bullion.

U.S. Treasury yields rose on Thursday with benchmark yields touching nearly eight-week highs, while the dollar gained in Asian trading on Friday.

Palladium advanced 0.2 percent to $833 per ounce after hitting its lowest since June 2 earlier the session. The metal is set to drop 1.2 percent this week.

Meanwhile, platinum fell 1 percent, to $901.10 per ounce. It was down 1.7 percent for the week so far.

(Reporting by Nithin Prasad and Vijaykumar Vedala in Bengaluru; Editing by Joseph Radford and Christian Schmollinger)