* U.S. non-farm payrolls decline by more than expected
* Falling interest rates boost safe-haven demand
* SPDR Gold Trust holdings hit record
(Adds detail of ZKB palladium buying)
By Jan Harvey
LONDON, Feb 6 (Reuters) - Gold fell in volatile trade on
Friday after data showed the U.S. economy shed more jobs than
expected in January, boosting expectations Washington will act
quickly on its fiscal stimulus package.
Spot gold <XAU=> was at $909.60/911.60 an ounce at 1524 GMT,
against $913.75 late in New York on Thursday. In the immediate
wake of the data it jumped to a day high of $919.30.
U.S. gold futures for April <GCJ9> delivery on the COMEX
division of the New York Mercantile Exchange were up $1.20 to
$914.80 an ounce.
"The outlook for the fiscal stimulus package is a factor to
keep an eye on," said Peter Fertig, consultant to Dresdner
Kleinwort, the investment banking division of Dresdner Bank.
"It might be negative for gold if people expect the economy
is getting back on track again," he added.
The U.S. Senate was due to resume debate on a $937 billion
stimulus plan later in the day, after abruptly calling a halt to
a drive to forge a bipartisan agreement on Thursday night.
[]
U.S. markets climbed on Friday on the back of hopes for the
administration's fiscal stimulus plan, while European shares
remained higher.
"With the rise in stock markets, some investors just took
profits in gold and went back into stocks," said Fertig.
U.S. employers slashed 598,000 jobs in January, the deepest
cut in payrolls in 34 years, as the national unemmployment rate
shot up to 7.6 percent, according to the Labor Department.
[]
Gold has held firm over $900 an ounce for much of the week,
benefiting from a flight to safety among fund investors spooked
by volatility in other asset prices, while falling interest
rates are reducing the opportunity cost of holding bullion.
"When you have central banks reducing the cost of money, it
makes sense for funds to move into the alternative to money, and
that is gold," CMC Markets strategist Ashraf Laidi said.
ETFs, which issue securities backed by gold bullion, have
proved popular with investors seeking the safety of precious
metals without the drawbacks of holding coins or bars.
The SPDR Gold Trust, the world's largest exchange-traded
fund, said its bullion holdings rose to a record 867.19 tonnes
that day. []
Barclays Capital analyst Suki Cooper said ETF buying in
January had helped pick up the slack from falling jewellery
sales, and noted that the precious metal had defied fresh
strength in the dollar to rise.
"Investors are drawing on the wider economy as a reason to
invest in gold," she said.
The usual key external drivers of gold, the dollar and oil,
have become less influential as risk aversion has increased.
The dollar slipped to session lows against the euro on
Friday after the payrolls data, while oil slipped nearly 5
percent to below $40 a barrel. []
SILVER FIRMER
Among other precious metals, silver <XAG=> firmed to
$12.94/13.02 an ounce against $12.84.
Platinum <XPT=> edged up to $989.50/999.50 from $973.
Palladium <XPD=> rose more than 5 percent to a high of $212
an ounce, boosted by interest in the precious metal from
long-term investors and buying of exchange-traded funds.
Zurich Cantonal Bank (ZKB) said on Friday it bought 6,365
ounces of metal to back its palladium exchange-traded fund on
Feb. 5, bringing its total holdings to 532,000 ounces.
The latest rise means ZKB's palladium ETF <ZPAL.S> holdings
have risen 15,900 ounces or 3 percent since January 22.
"There have been some banks highlighting the fact that
(palladium) is undervalued relative to the other precious
metals," Mitsubishi precious metals strategist Tom Kendall said.
"That has pulled in a bit of buying from some of the funds."
Palladium was later at $207/212 an ounce against $200.50.
(Reporting by Jan Harvey; Editing by Anthony Barker)
