* U.S. non-farm payrolls decline by more than expected
* Falling interest rates boost safe-haven demand
* SPDR Gold Trust holdings hit record
(Updates with U.S. jobs data, comment)
By Jan Harvey
LONDON, Feb 6 (Reuters) - Gold fell to session lows 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 $907.15/909.15 an ounce at 1431 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 fell $3.80 to
$909.80 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 opened firmer 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," he added.
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.
Falling interest rates around the world are also 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. []
"We have seen a lot of ETF demand, particularly because the
external market conditions for gold and silver are very positive
at the moment," said Barclays Capital analyst Suki Cooper.
She 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
prices, have become less of a direct influence as risk aversion
has increased.
"This move up in gold has happened despite a pick-up in the
dollar and weakness in oil, which suggests gold has once again
found its own momentum," said ScotiaMocatta, the precious metals
division of the Bank of Nova Scotia, in a research note.
The dollar slipped to session lows against the euro on
Friday after the payrolls data. A weaker dollar usually supports
gold, which is often bought as a currency hedge.
Oil meanwhile slipped nearly 5 percent to below $40 a barrel
as bleak economic news fuelled demand fears. []
Among other precious metals, silver <XAG=> firmed to
$12.94/13.02 an ounce against $12.84.
Platinum <XPT=> edged up to $984/994 an ounce from $973.
Palladium <XPD=> rose more than 5 percent to $211.50 an
ounce, boosted by interest in the precious metal from long-term
investors and buying of exchange-traded funds.
"There has been some physical buying for ETFs," Mitsubishi
precious metals strategist Tom Kendall said.
"There have been some banks highlighting the fact that it is
undervalued relative to the other precious metals. That has
pulled in a bit of buying from some of the funds."
Palladium was later at $207.50/211.50 an ounce against
$200.50 late on Thursday .
(Reporting by Jan Harvey; Editing by Peter Blackburn)
