Gold rises, yields retreat after softer US jobs data

By Rahul Paswan

(Reuters) - Gold prices gained over 1% on Wednesday as bond yields fell after weaker-than-expected U.S. private payrolls data bolstered expectations that the Federal Reserve would cut interest rates later this year.

Spot gold was up 1.2% at $2,355.49 per ounce, as of 1830 GMT, after a 1% fall in the previous session. U.S. gold futures settled 1.2% higher at $2,375.50.

Benchmark U.S. Treasury yields fell to their lowest since April 5 after data showed U.S. private payrolls increased less than expected in May. [US/]

A weak labour number adds fuel to the fire that the Fed may have to cut rates before year end, boosting gold's appeal, said Bob Haberkorn, senior market strategist at RJO Futures. Lower interest rates decrease the opportunity cost of holding non-yielding gold.

According to the CME FedWatch Tool, traders now see about a 71% chance of a Fed rate cut by September, versus below 50% last week.

The non-farm payrolls report scheduled for Friday is highly awaited by traders as it will have the potential to influence gold prices, analysts said.

"If we see the U.S. Payrolls drops significantly on Friday, the market will be a lot more comfortable in thinking that the Federal Reserve could start cutting (interest rates) in sometime in late summer September," said Bart Melek, head of commodity strategies at TD Securities.

On the physical front, net purchases of gold by global central banks rose to 33 metric tons in April from a revised net buying of 3 tons in March, the World Gold Council (WGC) said, signalling the sector's continuing strong appetite for the metal despite high prices.

Among other precious metals, spot silver rose 1.7% to$29.99 per ounce, platinum was up 0.6% at $993.45 per ounce and palladium gained 1.7% to $931.18 per ounce.

(Reporting by Rahul Paswan in Bengaluru; Editing by Ravi Prakash Kumar and Vijay Kishore)