Gold turned higher in choppy trade Friday, snapping a five-week losing streak as the dollar fell sharply after a report showed U.S. employers cut more jobs than expected in December.
The disappointing employment report dampened hopes an economic recovery may be on the way, slashing expectations that a U.S. interest hike may be imminent - a bullish signal for gold and equities.
Gold prices have benefited from low interest rates in the last year, which contributed to dollar weakness and cut the opportunity cost of holding non-interest bearing assets.
"The play for gold [this year]is speculating on the move in U.S. interest rates," said Jeremy East, Standard Chartered's global head of commodity derivatives trading.
Meanwhile, the first U.S. platinum and palladium-backed exchange-traded product (ETP), which give investors easier access to the industrial metals used in automotive catalytic converters, have generated significant trading volume on its first trading day.
Spot gold hit a high of $1,139.30 (U.S.) an ounce following the data and was last at $1,136.20 an ounce at 3:18 p.m. ET, against $1,131.40 late in New York on Thursday. Earlier, it slipped as low as $1,119.45.
U.S. February gold futures settled up $5.20 at $1,138.90 an ounce on the Comex division of the New York Mercantile Exchange.
"People were largely going short into the market, and as the non-farm payrolls for December were slightly worse than expected, those shorts were covered," said Michael Widmer, an analyst at Bank of America Merrill Lynch.
"The dollar came off quite a lot on the back of it, and that contributed to pushing gold higher," he added.
The dollar plunged against the euro in volatile trade after the weak job report.
Investment demand for gold-backed exchange-traded funds remained soft after a lacklustre start to the new year. The largest gold ETF, New York's SPDR Gold Trust, reported a further 0.4 tonne dip in its holdings on Thursday.
Its holdings have fallen 10 tonnes in 2010 so far, while those of London-based ETF Securities' gold-backed exchange traded products are down 19,000 ounces in the same period.
Spot silver tracked gold higher to $18.44 an ounce against $18.22 late in New York on Thursday. Platinum hit a 16-month high of $1,576.50 and was later at $1,574 an ounce against $1,554.50, while palladium was at $425.50 an ounce against $424.
The first platinum and palladium-backed ETPs started in a positive note, with more than 400,000 contracts traded on a combined basis on the NYSE Arca platform.
Investment appetite for the metals is expected to be firm this year as a turnaround in the global economy lifts car demand. More than half the world's platinum and palladium is consumed by car makers.
China sold more than 13.5 million vehicles in 2009, the official Xinhua news agency said on Friday, overtaking the United States to become the world's largest auto market as government policy initiatives spurred demand.