* Gold reverses earlier losses as U.S. data hurts dollar
* SPDR gold ETF sees biggest one-day outflow since July
* Coming up: annual meeting of the IMF, World Bank
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By Jan Harvey
LONDON, Oct 8 (Reuters) - Gold jumped to session highs on
Friday after U.S. non-farm payrolls data for September came in
much weaker than expected, knocking the dollar against the euro,
but quickly surrendered gains as the U.S. unit fought back.
Spot gold <XAU=> hit a peak of $1,345.55, but quickly gave
up gains to retreat to $1,333.10 an ounce by 1307 GMT, against
$1,332.65 late in New York on Thursday. U.S. gold futures for
December delivery <GCZ0> fell 60 cents to $1,334.40.
The numbers, which showed U.S. employers shed 95,000 jobs
last month against expectations for none to be lost, may
increase expectations the Federal Reserve may move towards
further measures to stimulate the flagging U.S. economy.
"A weak number equals increased likelihood of QE2, equals
higher gold prices," said Saxo Bank senior manager Ole Hansen.
"If we can move back above $1,340 today, it looks good heading
into next week."
However, the dollar's resilience to the data may prove a
significant barrier to renewed strength in the precious metal,
he said. "(It) still feels like this correction may not have
fully run its course, but the dollar will decide in the end."
Gold's near-10 percent rally from end-August to Thursday's
record high at $1,364.60 an ounce had come largely on the back
of expectations for further U.S. quantitative easing, which
knocked the dollar 7.5 percent lower last month versus the euro,
its worst monthly performance since Dec. 2008.
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For a graphic showing expectations for quantitative easing to
lift gold, click on: http://r.reuters.com/kaf27p
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Gold prices fell below $1,330 an ounce earlier on Friday
after a Federal Reserve official was quoted as saying the
pursuit of further U.S. monetary easing was a "tough call", but
moved higher after the payrolls report.
The dollar fell against the euro and hit a fresh 15-year low
below 82 yen in the wake of the data, but quickly recovered to
rise 0.4 percent versus the single currency. []
The foreign exchange markets, which have a significant
impact on gold, are now awaiting the annual meeting of the
International Monetary Fund and World Bank this weekend.
GOLD ETF HOLDINGS DROP
Meanwhile the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, reported a 13.4 tonne
outflow on Thursday, the biggest one-day drop in its holdings
since late July. []
"It is striking that (yesterday's) price fall was
accompanied by high outflows from the SPDR Gold Trust," said
Commerzbank in a note. "Investors are clearly taking profits as
prices fall.
"This is a sign, in our view, that the air gets more and
more thin at the current price level, and it also shows that the
swift rise in prices is probably largely due to short-term
oriented financial investors."
Nonetheless, technical analysts say gold is well-positioned
to extend its recent record highs to new levels, although a
short-term correction may be seen to settle prices at higher
levels. []
Among other precious metals, silver <XAG=> was at $22.65 an
ounce against $22.52, well off the previous day's 30-year high
of $23.51 an ounce.
Holdings of the world's biggest silver-backed ETF, the
iShares Silver Trust <SLV>, climbed to a record 9,997.39 tonnes
on Thursday, reflecting strong investor demand for the metal.
Elsewhere platinum <XPT=> was at $1,684 an ounce against
$1,691.60, while palladium <XPD=> was at $574 against $579.15.
Investment firm Castlestone Management told Reuters in an
interview on Friday platinum offered a better bet for investors
long-term than gold. []
(Editing by James Jukwey)
