* Slower US payrolls drop dries up safe-haven demand
* Inflation worries overwhelmed by economic optimism
* COMEX open interest above 400,000 lots
(Recasts, updates prices, market activity to settlement; new byline, changes
dateline, pvs LONDON)
By Frank Tang
NEW YORK, June 5 (Reuters) - Gold futures fell toward $950 an ounce on
Friday, losing 2 percent as a monthly report showing the fewest U.S. job losses
since September boosted the dollar and economic recovery hopes dented gold's
safe-haven appeal.
"We have a very good employment number, and that lessens the
flight-to-safety need for gold," said Bill O'Neill, managing partner at LOGIC
Advisors.
Economic optimism and technical resistance pushed gold lower after
inflation worries helped lift bullion within sight of the $1,000 level this
week, traders said.
U.S. August futures <GCQ9> settled down $19.70, or 2 percent, at $962.60 an
ounce on the COMEX division of the New York Mercantile Exchange.
Spot gold <XAU=> reached a one-week low of $954 an ounce, and was at
$954.70 an ounce at 2:23 p.m. EDT (1823 GMT), against $979.10 an ounce late in
New York on Thursday.
Bullion was under heavy pressure as the milder pace of job losses helped
the dollar rally, on track for its largest weekly gain in nearly two months
against a basket of major currencies. []
Standard Bank analyst Walter de Wet said in the medium term the payrolls
numbers, along with other encouraging recent data, may reassure investors that
the economy is no longer worsening, and could also fuel fears of future
inflation.
"But in the short term, the dollar is going to drive prices," de Wet said.
"People will follow the dollar."
O'Neill said the weakness of major currencies because of excess liquidity
created by government stimulus programs and potential long-term inflation were
supportive to gold prices.
"And we still have a tenuous economic and financial structure, and that is
not going to go away in a matter of days," O'Neill said.
COMEX OPEN INTEREST RISES
Investment demand was largely absent, with holdings of the SPDR Gold Trust,
the largest gold exchange-traded fund, steady on Thursday.
However, open interest of COMEX gold futures rose above the 400,000 level,
up 5,776 at 401,699 lots as of June 4, a sign that investment demand among
funds and institutional investors are rising, analysts said.
Silver <XAG=> was at $15.52 an ounce against $15.85. Palladium rose,
extending the previous session's fund-driven gains, while platinum edged
lower.
Platinum <XPT=> was at $1,262 an ounce against $1,290.50, while palladium
<XPD=> was at $255.50 against $252.50.
Silver and platinum group metals were lifted in the previous session by
gains in other industrial commodities like oil and copper, which benefited from
hopes the downturn may bottom out. However, a dollar rally led to profit taking
on Friday.
(Additional reporting by Jan Harvey; Editing by David Gregorio)
