NEW YORK/LONDON - Gold fell on Friday after stronger than forecast U.S. payrolls data boosted expectations that the Federal Reserve will press ahead with another U.S. interest rate hike this month, lifting the dollar.
The metal is highly sensitive to rising rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Spot gold lost 0.2 percent at $1,295.19 by 1:32 p.m. EDT (1732 GMT), earlier peaking above $1,300 an ounce. U.S. gold futures for August delivery settled down $5.40, or 0.4 percent, at $1,299.3 per ounce.
Spot gold is poised to close the week about 0.5 percent lower.
"Treasuries are up, the dollar ticked back up and there's no geopolitical news really supportive of gold at the moment," said Philip Streible, senior market strategist at RJO Futures.
The dollar rose against the euro and Treasury yields hit session highs after the payrolls report showed the U.S. economy added 223,000 jobs last month, well ahead of expectations for 188,000 jobs. Wages rose solidly, cementing expectations that the Federal Reserve will raise interest rates this month.[nLNS1HEEDX]
While the euro failed to sustain gains it made earlier against the dollar after the apparent end of a political crisis in Italy that had rattled markets this week, world stocks stayed in the black as investors welcomed the Italian deal. [MTKS/GLOB]
However, investors remain concerned over a trade stand-off between the United States and its trading partners, which deepened on Thursday after the U.S. proceeded with tariffs on aluminum and steel imports.
While a worsening global trade situation could benefit gold if it curbs appetite for assets seen as higher risk, it is not yet offsetting the negative impact of an expected increase in rates, and the effects of that on the dollar.
"Prices continue to follow the U.S. dollar, leaving gold in 'currency mode' rather than 'commodity mode'," Julius Baer said in a note.
Meanwhile, U.S. interest rates remain in focus, said Capital Economics analyst Simona Gambarini.
"Investors are waiting to see whether the Fed will hike rates again, and what their take on inflation and those risks in Europe and with trade will be."
Spot silver increased 0.4 percent at $16.42 an ounce, but headed for a 0.5 percent weekly decline.
Platinum gained 0.3 percent at $903.90 an ounce, earlier hitting $1,005.40, a 10-day high and heading for a 0.4 percent weekly rise. Palladium rose 1.9 percent at $1,003.90 per ounce, poised for a 2.3 percent increase on the week.