Gold steadies below $1,300/oz ahead of U.S. payrolls data

By Jan Harvey

LONDON (Reuters) - Gold steadied below $1,300 an ounce on Friday ahead of U.S. payrolls data due later that will be closely watched for clues on the outlook for U.S. interest rate policy.

The U.S. non-farm payrolls report for May is expected to show the world's largest economy added 188,000 jobs last month, keeping the Federal Reserve on track to raise interest rates this month.

Gold 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 stood at $1,297.14 an ounce at 1120 GMT, little changed from late on Thursday, while U.S. gold futures for August delivery were down 0.2 percent at $1,301.90 an ounce.

"Investors will be closely watching the upcoming U.S. NFP data," Think Markets chief market analyst Naeem Aslam said.

"Any strength in the average hourly earning would make the dollar stronger. Robust U.S. NFP numbers would push the gold price lower...The support of $1,280 would be the target point," he said.

Gold took little direction from currency markets on Friday, as a coalition deal put an apparent end to a political crisis in Italy, allowing the euro to stabilise against the dollar.

World stocks also rose and bond yields fell as investors welcomed the Italian deal, although appetite for risk remained fragile as concerns simmered over the prospect of a global trade war.

A stand-off between the United States and its trading partners deepened after the United States on Thursday 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, the metal is still suffering from expectations that the Fed will press ahead with rate hikes this year.

"Bullion is likely to trade reactive to headlines and U.S. dollar flows," MKS said in a note. "(It needs) to consolidate above $1,300 to instil confidence in the market for a test through the 200-day moving average at $1,308."

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 0.5 percent at $16.42 an ounce, while platinum was 0.3 percent higher at $903.90 and ounce and palladium was flat at $985.45 an ounce.

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