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By Frank Tang and Pratima Desai
NEW YORK/LONDON, June 6 (Reuters) - Gold ended nearly 3
percent higher on Friday to a 1-week high on the back of record
crude oil and the dollar's drop after data showed a sharp rise
in the U.S. unemployment rate and as equity markets slipped on
worries about economic growth.
Gold <XAU=> rose to a high of $900.30 a troy ounce and was
last at $896.80/898.20 an ounce by New York's last quote at
2:15 p.m. EDT (1815 GMT), compared with $874.55/875.95 late in
New York on Thursday, when it hit $864.45 -- its lowest level
since May 15.
"There've been significant inflation fears out there, and
they were alleviated for a few days with oil backing off, but
the last two days' gains in the oil market have put inflation
right back on the front burner," said Bill O'Neill, managing
partner of LOGIC Advisors in Upper Saddle River, New Jersey.
U.S. crude futures <CLc1> soared more than $10.75 to end at
record $138.54 a barrel on Friday, bringing gains in the last
two days to $15 and boosting gold's appeal as a hedge against
inflation.
"You don't have to look much further than that to see why
gold should be up," O'Neill said.
The active U.S. August gold contract <GCQ8> on COMEX
division of New York Mercantile Exchange settled up $23.50, or
2.7 percent, at $899.00 an ounce.
U.S. employers shed jobs for a fifth straight month in May
and the unemployment rate jumped to its highest in more than
3-1/2 years, a Labor Department report showed. []
"Gold rallied in line with moves down in the dollar. The
worry is if unemployment is climbing, then mortgage defaults
and subprime losses rise," said David Thurtell, analyst at BNP
Paribas.
U.S. unemployment rose to 5.5 percent in May from 5
percent, its highest since Oct. 2004. Some 49,000 jobs were cut
from payrolls in May, up from a revised 28,000 that were lost
in April.
"The news is bearish for equities -- so gold benefits as an
alternate asset class," Thurtell said.
U.S. stocks dropped 3 percent in late trade on Friday.
Meanwhile, O'Neill said that record crude oil combined with
weak U.S. economic news could hamper the U.S. Federal Reserve's
ability to cut rates further, and that should bode well for
gold in the near term.
Gold is traditionally used as a hedge against financial
uncertainty, which often manifests itself in dollar weakness.
It also makes commodities priced in the U.S. currency cheaper
for holders of other currencies.
GOOD DAY FOR GOLD
Also weighing on the dollar and boosting the euro and
precious metals was a speech by European Central Bank president
Jean-Claude Trichet, who said on Thursday that the central bank
was on high alert over inflation.
"Its going to be a good day for gold. Essentially it's
hostage to the dollar," said Nick Moore, analyst at ABN Amro.
Platinum <XPT=> gained nearly 4 percent to $2,079 an ounce,
the highest since May 28. It was last at $2,064/2,084 an ounce
from $2,000.50/2,020.50 an ounce late on Thursday.
Platinum hit a record high of $2,290 an ounce on March 4 as
worries about supplies from South Africa mounted. South Africa
is the world's largest producer of the industrial metal used in
autocatalysts.
"South African power shortages are keeping the platinum
market on edge as a swift resolution to the structural problems
looks far from near," Barclays Capital said in a note.
"We see further upside potential in prices as platinum
supplies are heavily dependent on South Africa and the delicate
power supply situation as well as mine safety concerns leave
mine output extremely susceptible to potential disruptions."
Silver <XAG=> was up at $17.52/17.60 an ounce from
$17.12/17.18 an ounce late on Thursday in New York. Spot
palladium <XPD=> was up at $429/437 an ounce from its Thursday
U.S. close of $421.00/429.00 an ounce.
(Additional reporting by Chloe Fussell in London; Editing by
Christian Wiessner)
