Gold slips after upbeat U.S. payrolls data

By Jan Harvey

LONDON (Reuters) - Gold fell on Friday after stronger than forecast U.S. payrolls data boosted expectations that the Federal Reserve will press ahead with another U.S. interest rate hike this month, lifting the dollar.

The metal is highly sensitive to rising rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Spot gold was down 0.3 percent at $1,294.06 an ounce by 1322 GMT, having earlier edged just above $1,300 an ounce. U.S. gold futures for August delivery were down 0.4 percent at $1,298.90 an ounce.

The dollar rose against the euro and Treasury yields hit session highs after the payrolls report showed the U.S. economy added 223,000 jobs last month, well ahead of expectations for 188,000 jobs.

The stronger dollar is not playing in favour of higher gold prices, Capital Economics analyst Simona Gambarini said.

"There is not much interest at the moment in getting into the gold market, with the Federal Reserve meeting just (a short way) away," she said. "Investors are waiting to see whether the Fed will hike rates again, and what their take on inflation and those risks in Europe and with trade will be."

While the euro failed to sustain gains it made earlier against the dollar after the apparent end of a political crisis in Italy that had rattled markets this week, world stocks stayed in the black as investors welcomed the Italian deal.

However, investors remain concerned over a trade stand-off between the United States and its trading partners, which deepened on Thursday after the U.S. went ahead with tariffs on aluminium and steel imports from Canada, Mexico and the European Union, ending a two-month exemption.

While a worsening global trade situation could benefit gold if it curbs appetite for assets seen as higher risk, it is not yet offsetting the negative impact of an expected increase in rates, and the effects of that on the dollar.

"While geopolitics are dominating the headlines, neither renewed trade tensions nor the crisis in Italy ignited safe-haven demand for gold," Julius Baer said in a note on Friday.

"Prices continue to follow the US dollar, leaving gold in 'currency mode' rather than 'commodity mode'."

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 0.52 percent to 847.03 tonnes on Thursday.

Among other precious metals, silver was up 0.6 percent at $16.45 an ounce, while platinum was 0.6 percent higher at $907.10 and ounce and palladium was up 0.7 percent at $991.60 an ounce.

(Additional reporting by Karen Rodrigues in Bengaluru; Editing by Mark Heinrich/David Evans)