Gold surged 4% on Friday, its biggest one-day rise in more than three years, as a surprisingly weak US payrolls report added to fears about a global economic slowdown and fuelled talk of further US monetary easing.
The precious metal fell in early trading, then rebounded USD 60 an ounce from its session low as funds piled into gold for protection against economic uncertainty after the US unemployment rate rose for the first time in 11 months.
Gold rose 3.5% this week, its largest gain since late January, when investors were already fretting over Spain's poor finances and a possible Greek exit from the euro zone, which could send Europe's debt crisis spiral out of control.
Bullion broke its trend of trading in sync with riskier assets, rising on a day when Brent crude oil plummeted below USD 100 a barrel and the Dow Jones industrial average fell 2% to wipe out this year's gains.
Technical buying also helped as the metal is setting up for a bullish triple-bottom chart pattern after gold held key support near USD 1,530 an ounce, which it held for most of this year.
Gold's rally was reminiscent of its rise earlier this year when the Federal Reserve said it would keep interest rates at zero for the next several years and indicated a new stimulus program was possible to reinvigorate economic growth.
"People are speculating that there will be some form of program coordinated by central banks, which is ultimately inflationary and gold catches a bid," said Jeffrey Sherman, commodities portfolio manager of asset manager DoubleLine Capital which oversees USD 35 billion in assets.
Spot gold hit a near two-week high of USD 1,629.41 an ounce and was up 3.9% at USD 1,624.20 at 3:11 pm. EDT (1911 GMT), its largest one-day rally since January 2009.
US gold futures for August delivery settled up USD 57.90 at USD 1,620.50, with trading volume about 50% above its 30-day average, preliminary Reuters data showed.
FUND, TECHNICAL BUYING
Gold is forming a potential triple-bottom pattern dating back to last September, said Rick Bensignor, chief market strategist of Merlin Securities.
Gold ended May with its fourth straight monthly decline, the longest in 12 years. Friday's rally extended gold's gain year to date to around 4%.
"Larger institutions will commit money to gold in ways they never had before. We are talking about CALPERS, Yale and Harvard," said Robert Lutts, chief investment officer of Cabot Money Management with over USD 500 million in client assets.
Prominent hedge fund managers led by John Paulson have in recent years invested in gold as a hedge against inflation and the loss of purchasing power in their portfolios as a result of easy monetary policy used by central banks.
Gold gained 15% earlier this year after the US Federal Reserve said in January it would keep interest rates near zero until at least late 2014 and could introduce a fresh round of asset-purchase program known as quantitative easing.
Among other precious metals, spot silver rose 2.4% at USD 28.44 an ounce. Spot platinum was up 2.2% at USD 1,440.24 an ounce, while spot palladium edged up 0.2% at USD 609.99 an ounce
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