Gold steady, though investors cautious before U.S. payrolls

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold steadied on Friday, set for a weekly rise and holding onto its biggest quarterly gain in nearly 30 years, but investors were cautious ahead of a U.S. jobs report.

Gold has climbed 1.2 percent so far this week, which included the close on Thursday to its best quarterly performance since 1986, a 16 percent jump, as global growth concerns diminished expectations of further U.S. interest rate hikes this year. A tumble in the global stock market also triggered safe-haven demand for the metal.

Bullion is sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets, while boosting the dollar.

However, better-than-expected payrolls data could revive expectations of higher U.S. rates, strengthen the dollar and hurt gold. U.S. payrolls are expected to grow by 205,000, according to a Reuters poll.

Spot gold was steady at $1,230.61 an ounce by 0238 GMT, following a 0.6 percent rise overnight. The dollar rose 0.1 percent against a basket of major currencies but was not very far from its lowest since mid-October reached on Thursday.

"If we start to see macro readings out of the United States pick up a head of steam (with a strong jobs number helping) this could prompt a change in the current thinking that the Fed will remain dovish for a long while," INTL FCStone analyst Edward Meir said in a note.

A robust number could instead revive expectations that an interest rate hike in June was possible, Meir said.

Federal Reserve Chair Janet Yellen said this week that the U.S. central bank should proceed only cautiously as it looks to raise interest rates.

New York Federal Reserve President William Dudley on Thursday said he agrees with Yellen's views that the U.S. central bank should proceed cautiously, particularly given risks from slow growth abroad.

U.S. economic data will remain in focus as investors try to gauge the strength of the economy and its impact on monetary policy.

Data on Thursday showed the number of Americans filing for unemployment benefits unexpectedly rose last week, but a sharp drop in layoffs in March suggested the labour market momentum remained intact.

Asian shares and the dollar started the new quarter on a downbeat note on Friday as caution ruled ahead of surveys on global manufacturing and the latest reading on U.S. jobs.

In the physical bullion market, higher gold prices curbed demand for the precious metal in Asia, with premiums in several major markets taking a hit. [GOL/AS]

India's gold demand in the March quarter is set to drop by about two-thirds from a year ago to its lowest in seven years.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford and Christian Schmollinger)