LONDON Gold surged more than 2 percent and was on track for its biggest one-day jump in more than a month on Friday after U.S. payrolls data fell well short of forecasts, boosting expectations that the Federal Reserve will stand pat on interest rates.
The U.S. economy created the fewest jobs in more than five years in May, a Labor Department report showed on Friday, hurt by a strike by Verizon workers and a fall in goods-producing employment.
That could make it difficult for the Fed to raise interest rates further. The data sparked a rebound in gold, which had slid to a 3-1/2 month low of $1,199.60 on Monday on growing expectations for a hike.
Spot gold was up 2.3 percent at $1,238.85 an ounce at 1305 GMT, while U.S. gold futures for June delivery were $28.20 an ounce higher at $1,240.80.
"The sharp drop in non-farm payrolls is negative for the dollar and positive for gold," ABN Amro analyst Georgette Boele said. "Expectations for a rate hike soon have clearly diminished... Precious metals prices will fly higher."
The dollar slid to its lowest since May 17 against a currency basket in the wake of the data, and was down 1.3 percent versus the euro.
Gold has fallen for the last four weeks after comments from senior U.S. central bank officials, including chief Janet Yellen, boosted expectations of an imminent rate rise.
Gold is highly sensitive to U.S. rate expectations, as rising rates lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
While it remains up 14 percent so far this year, prices have fallen more than 5 percent since minutes from a Fed meeting indicated in mid-May that a summer rate rise may be on the table.
"June probability for a hike is back at the pre-minutes level, according to Fed fund futures," Commerzbank analyst Carsten Fritsch said. "Gold traded at $1,280 before the Fed minutes were published."
Gold demand in Asia, home to the world's biggest consumers of physical gold, was muted this week as a slight increase in India and Japan was offset by reductions in other trading centres as buyers awaited further price declines.
Among other precious metals, platinum was up 2.6 percent at $981.65 an ounce after earlier touching its lowest since April 8 at $950 an ounce.
Silver was up 2.3 percent at $16.34 an ounce, while palladium was up 3.7 percent at $552.11 an ounce.
(Additional reporting by Koustav Samanta and Vijaykumar Vedala in Bengaluru; Editing by Susan Fenton and Adrian Croft)