NEW YORK/LONDON Gold shot up 2 percent on Friday for the second time in two weeks, hitting six-month highs as a tepid U.S. jobs report strengthened expectations of further monetary easing by the Federal Reserve.
Extending a month-long rally, spot gold bolted up by $30 an ounce just after the U.S. Labor Department reported that nonfarm payrolls rose 96,000 last month, well short of expectations for a 125,000 rise.
The numbers stoked expectations that Fed policy makers will agree at next week's meeting to launch a third round of government bond buying, or quantitative easing, also known as QE3, to stimulate the world's largest economy.
"Gold is going through the roof because this negative data makes QE3 more likely now," said Daniel Briesemann, commodities analyst at Commerzbank in Frankfurt.
Spot gold ended the day up 2.06 percent at $1,736 per ounce, having touched its highest level since February. Copper also rallied while the dollar .DXY dived more than 1 percent.
U.S. futures settled up 2.05 percent at $1,740.5 an ounce after hitting $1,745.4, also the highest since February.
Bullion outperformed the euro, which hit four-month highs against the dollar, and the broader market. Silver and platinum also rose.
The Thomson Reuters-Jefferies CRB index .CRB of 19 commodities rose 0.9 percent.
Bullion secured its third straight weekly gain, the longest streak since January. With growing hope for monetary stimulus in Europe and the United States, investors boosted holdings of bullion by exchange-traded funds (ETFs) to a record this week.
Investors who had taken short positions in gold have been punished two Fridays in a row. Last week prices jumped 2 percent.
"A lot of people didn't jump on the bandwagon (ahead of the data). The shorts are in trouble and will day trade out," George Nickas, commodities broker at INTL FCStone, said.
QE VS THE CHARTS
Many investors worry that a third round of quantitative easing by the Fed -- printing money to buy government bonds to keep long-term interest rates low -- will lead to higher inflation. Gold prices doubled in the last four years, as the Fed implemented the first two rounds of quantitative easing.
Gold has rallied almost 10 percent since the start of August, pushing its 14-day relative strength index to 80, well above the 70 level that signals an overbought market to technical analysts.
Still, chart watchers say the rally may have further to run after gold broke out of a six-week trading range when it pierced $1,636 on August 21.
Thursday's close above $1,700 per ounce provided psychological support to gold bulls, who had pushed prices to 5-1/2-month highs after the European Central Bank unveiled plans for a bond-buying program to stem the euro-zone debt crisis.
Investor appetite for hoarding gold shows no signs of abating. Holdings of gold-backed exchange-traded funds hit a record high of 72.1 million ounces, or 2,044 metric tons, by Thursday. ETF holdings were up more than 38 metric tons this year, with most of the rise occurring since August when hopes for stimulus from central banks started to run high.
Silver rose to its highest since mid-March at $33.71 per ounce. It was up 3.19 percent at $33.66 an ounce.
Platinum pierced $1,600 for the first time since April with focus still on dominant producer South Africa. The metal, mainly used in jewelry and auto catalysts, came off the session high and was up 0.51 percent late at $1,584.1 an ounce.
Two percent of shift workers at Lonmin Plc's (LONJ.J) (LMI.L) South African operations arrived for work on Friday, the platinum miner said.
The world's third-largest platinum miner has been crippled by a four-week strike at its Marikana operations. The company signed a "peace deal" with some of its unions on Thursday. However, that did not include militant breakaway union AMCU.
Palladium was up 1.26 percent at $649.7 an ounce.
(Editing by Keiron Henderson and David Gregorio)
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