* U.S. April non-farm payrolls fall by less than expected
* Risk appetite improves but inflation fears return to fore
(Updates with non-farm payrolls data, adds comment)
By Jan Harvey
LONDON, May 8 (Reuters) - Gold prices pared gains on Friday
after U.S. non-farm payrolls fell less than expected in April,
as investors took signs of an economic recovery as a reason to
sell bullion held as a safe store of value.
However, the market remained broadly firmer as the dollar
weakened and fears an economic recovery could spark inflation
fuelled buying of the metal as a hedge against rising prices.
Spot gold <XAU=> was bid at $914.15 an ounce at 1300 GMT,
off an earlier high of $919.65, but still than late in New York
on Thursday when it was quoted at $909.05 an ounce.
U.S. gold futures for June delivery <GCM9> on the COMEX
division of the New York Mercantile Exchange edged down 60 cents
to $914.90.
"Gold is stuck between the people who want to buy it as an
inflation hedge and those who want to sell out because they
think the world is becoming a better place," said Saxo Bank
senior manager Ole Hansen.
Traders will be watching the dollar for direction, he added.
"Gold has been helped by the weaker dollar this week," he said.
The dollar slipped to a one-month low against the euro after
data showed the United States shed fewer jobs than expected last
month, slowing safe-haven flows into the U.S. currency.
Employers cut only 539,000 jobs in April, the smallest
number since October and fewer than the 590,000 losses predicted
by analysts polled by Reuters. []
European shares pared gains in the wake of the news, while
Wall Street futures also retreated, after the U.S. Labor
Department revised February and March payrolls figures upwards.
[] []
While gold's appeal as a haven is decreasing, it continues
to be supported by inflation expectations, analysts said.
"The inflation theme is coming back into the gold market,"
said Deutsche Bank trader Michael Blumenroth. "There is not so
much safe-haven buying into the gold market, but on the other
hand... inflation expectations are coming back."
While data shows little inflationary pressure at present,
analysts say heavy interest rate cuts and quantitative easing
could cause inflation to surge when the global economy recovers.
The European Central Bank said on Thursday it was cutting
key interest rates to 1 percent, while the Bank of England
announced it was expanding its asset purchase programme.
INVESTMENT
Fresh demand for gold products such as exchange-traded funds
remains scarce. The world's largest gold ETF, the SPDR Gold
Trust <GLD>, said its holdings were unchanged on Thursday from
the previous session at 1,104.09 tonnes.
Barclays Capital said in a note investor interest in
commodities had shifted away from precious metals towards energy
in the second quarter. []
Precious metals saw an inflow of $12.5 billion in the first
three months of 2009 but an outflow of about $500 million in the
second quarter. "In the near term, a lack of fresh investor
interest is likely to stem upward momentum," it said.
Nonetheless, it added, dollar weakness and inflation
expectations are likely to push prices up further down the line.
Silver edged up along with gold, though it remained below a
10-week high of $14.13 an ounce hit on Thursday as investment
was boosted by gains in both industrial and precious metals.
Silver <XAG=> was bid at $13.93 an ounce against $13.78.
The gold-silver ratio, a key measure of the white metal's
value, has slipped to just over 65 from around 71 a month ago.
Among other precious metals, spot platinum <XPT=> was bid at
$1,148.50 an ounce against $1,144, while spot palladium <XPD=>
was bid at $242 an ounce against $237.
London-based ETF Securities said its platinum-backed ETF saw
an outflow of just over 12,000 ounces on Thursday, or 3.6
percent of its holdings. ETF buying has been a key factor
supporting precious metals demand.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
