Gold Prices Bounce Back on US Jobs Data But Post Weekly Loss

Gold prices ended lower this week, but not before logging strong intra-day gains on the final trading day.

Spot gold hovered at $1,309.80 (£856.86 , €985.92) an ounce, dropping 1.8% in the week ending 3 August. US gold futures for December delivery settled down 70 cents at $1,310.50 an ounce, preliminary Reuters data showed.

A mixed US nonfarm payrolls report boosted intra-day prices on Friday, as it eased fears surrounding an imminent cutback in monetary stimulus by the Federal Reserve. The Fed's massive $85bn a month bond-buying program has been providing stimulus to the US economy, and markets the world over, for some time.

Gold initially fell to a two-week low at $1,280 an ounce after positive US growth and manufacturing activity data, earlier in the week, reduced the metal's attractiveness as an investment hedge. The world's leading economy expanded 1.7% in the second quarter. US factory activity grew at its fastest pace in two years in July.

Gold bounced back on Friday, gaining about $30 or 2% in intra-day trade, after US government data showed that America created fewer jobs in July, compared to June, just as the jobless rate fell to its lowest in over four years that month.

The jobs data fuelled a sharp drop in US Treasury bond yields, seen as measures of short-term interest rates.

"Gold seems to be more sensitive to signs of tapering than any other assets. Certainly, the direction of interest rate is a very crucial thing for gold at this point," Reuters quoted Bill O'Neill, partner of commodities investment firm LOGIC Advisors, as saying.

The US Federal Reserve remains determined to start trimming its $85bn bond-buying programme later this year but continues to remain tight-lipped about when the planned reduction will take place.

Earlier this week, the Fed's policy-making committee said nothing about how much longer it would continue with its bond-buying stimulus. A Fed statement said the central bank will continue buying mortgage and treasury securities to further strengthen the US economy which it said was still challenged by federal austerity measures.