Gold jumped 2 percent on Friday for the second time in two weeks, hitting six-month highs as a grim U.S. jobs report fed 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 data showed nonfarm payrolls rose only 96,000 last month, below 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.
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"Gold is going through the roof because this negative data makes QE3 more likely now," said Daniel Briesemann, commodities analyst at Commerzbank in Frankfurt.
By 12:35 p.m. EDT (1635 GMT), spot gold was up 2.13 percent at $1,737.26 per ounce, having touched its highest since February. U.S. gold futures were up 2.01 percent at $1,739.8 an ounce after hitting $1,745, also the highest since late February.
Bullion outperformed the euro, which hit a four-month high against the dollar, and the broader commodity market.
Silver, platinum and copper also rose while stock markets were little changed. The Thomson Reuters-Jefferies CRB index of 19 commodities was up 0.71 percent.
Bullion was headed for its third straight weekly gain, the longest streak since January. With signs of imminent monetary stimulus in the United States and Europe, the amount of bullion held by exchange-traded funds (ETFs) hit a record this week.
Investors who had taken short positions in gold have been punished two Fridays in a row. Last week prices also 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.
While the unemployment rate dropped to 8.1 percent from 8.3 percent in July, it was largely due to Americans giving up the search for employment.
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 tried to steer the economy out of the financial crisis and its aftermath with the first two rounds of quantitative easing.
Gold has rallied almost 10 percent rally since the start of August, pushing its 14-day relative strength index (RSI) to 80, well above the 70 that technical analysts consider overbought.
Still, chart watchers the rally may have further to run after breaking out of a six-week trading range when it pierced $1,636 on Aug. 21.
Thursday's close above $1,700 per ounce also provided psychological support, as prices hit 5-1/2-month highs after the European Central Bank unveiled plans for a bond-buying program to stem the deepening eurozone debt crisis.
ETF HOLDINGS
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 tonnes, by Thursday. ETF holdings were up more than 38 tonnes 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 $33.66 per ounce. It was holding close to those levels, up 3.1 percent at $33.62 an ounce at midday in New York.
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, was up 0.94 percent at $1,590.99 an ounce.
Two percent of shift workers at Lonmin Plc's 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 1.03 percent at $648.22 an ounce.
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