Gold rose almost 2 per cent Friday, rising above $1,400 (U.S.) an ounce as the dollar tumbled after disappointing jobs data cast doubt on the strength of the U.S. economic recovery.
Bullion was up more than 3 per cent this week, its biggest gain since April, pushed higher by lingering fears about a sprawling European debt crisis and fund buying in commodities across the board.
The Reuters/Jefferies CRB index, a gauge of commodities performance, rose 5 per cent, its biggest gain since October 2009.
Gold breached above $1,400 for the first time since November after data showed U.S. non-farm payrolls barely grew in November and the jobless rate unexpectedly hit a seven-month high.
"The employment data today makes it more likely that the U.S. Congress is going to have to extend unemployment insurance and the tax cuts. The market sees that as more deficits spending, creating a more positive atmosphere for gold because the dollar is going down on it," said Tom Pawlicki, precious metals and energy analyst at MF Global.
Pawlicki said the job report hardened the view that the Federal Reserve would stick to or even extend its $600-billion bond-buyback program to stimulate growth.
The White House said the November unemployment data underscored the importance of extending tax cuts for middle-class Americans and unemployment insurance.
Economists said the weak jobs report could give fresh impetus to get a deal done, as expiry of the tax cuts without offsetting stimulus elsewhere could deal a hard blow to the economy.
Spot gold rose 1.7 per cent to $1,408.19 an ounce at 3:01 p.m. EDT (2001 GMT), its biggest one-day rise since Nov. 4.
U.S. gold futures for December delivery settled up $16.90 an ounce at $1,406.2.
Silver tracked gold higher, trading up 2.7 per cent at $29.29 an ounce. COMEX gold and silver volume was sharply lower than their 30-day average, as investors have completed contract rollover prior to December's first notice day on Tuesday.
Earlier this week, gold seemed to struggle to gain upward momentum for a new test of its record high at $1,424.10 an ounce set on Nov. 9, in spite of lingering worries that Europe's debt crisis could spread to other countries following bailouts of Ireland and Greece.
But weak U.S. data has given new momentum to gold.
"It indicates we are not out of the woods yet in terms of what direction the U.S. economy is going to be heading," said Saxo Bank analyst Ole Hansen.
"We saw a lift in gold and that probably stems from the continued recovery of the euro against the dollar," he said.
The dollar dropped across the board after the bleak job picture, although persistent euro zone debt problems may limit losses, particularly against the euro.
The metal has been asserting its inverse correlation with the dollar, after earlier this week moving in tandem with the greenback as investors bought both the metal and the U.S. currency as safe havens.
EURO ZONE CONCERNS LINGER
Gold is also supported by lingering concerns that the euro zone debt crisis could spread to Spain and Portugal.
"The underlying issues haven't really been resolved and there's a general view that one way of resolving them is for the ECB to have a more accommodating monetary policy which is gold supportive," said Mitsubishi analyst Matthew Turner.
Gold does well in a low interest environment, as this cuts the opportunity cost of holding non-interest bearing assets.
Respected precious metals consultancy GFMS forecast silver would average around $30 an ounce in 2011, peaking at $35, while gold would peak at some $1,600-1,650 an ounce, and average $1,400.
Earlier this week, Goldman Sachs said gold will climb to $1,690 an ounce in the next 12 months as the resumption of quantitative easing will keep U.S. real interest rates low.
Platinum rose 0.8 per cent to $1,721.49, and palladium gained 0.7 per cent to $764.47, off a 9-year high of $776.22.