On the Comex division of the New York Mercantile Exchange, gold futures for October delivery settled at USD1,735.45 a troy ounce by close of trade on Friday, the highest level since February 29.
On the week, gold futures added 2.52%, the third consecutive weekly gain.
Gold futures were likely to find support at USD1,685.35 a troy ounce, the low from September 3 and at USD1,761.85, the high from February 20.
Gold prices rallied more than 2% Friday after the Department of Labor said the U.S. economy added 96,000 jobs in August, well below expectations for 125,000, following a downwardly revised 141,000 in July.
The unemployment rate ticked down to 8.1% from 8.3%, as more jobless workers exited the labor force.
The weaker-than-expected jobs data increased the chances that the Fed will implement further quantitative easing measures to strengthen the U.S. economic recovery, ahead of its upcoming policy meeting starting September 12.
Last week in a speech delivered in Jackson Hole, Wyoming, Fed chief Ben Bernanke said the persistently high rate of unemployment was a “grave concern” and reiterated that the central bank was ready to provide additional policy accommodation as needed to shore up growth.
Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would pump more money into the financial system.
The weak jobs data sparked a sell-off in the greenback, which further boosted the appeal of the precious metal. Gold futures are traded in U.S. dollars and become cheaper for investors who use other currencies when the greenback weakens.
The dollar index, which tracks the performance of the U.S. dollar against a basket of six other major currencies, lost more than 1% on Friday to settle the week at 80.35, the lowest since May 10.
The U.S. jobs report came one day after the European Central Bank announced details of its bond purchasing program aimed at stemming the debt crisis in the euro zone, dubbed Outright Monetary Transactions.
Speaking at the bank’s post-policy meeting press conference on Thursday, ECB President Mario Draghi said the plan would provide "a fully effective backstop" against market volatility.
Under the terms of the plan, the ECB would buy unlimited amounts of government bonds of up to three years in maturity, as long as the country in question is signed up to the OMT program and agrees to economic reforms in return for assistance.
The yield on Spanish 10-year bonds settled at 5.63% on Friday, falling below the 6% level for the first time since May, while the yield on Italian 10-year bonds fell to 5.05% by the close on Friday.
In the coming week, investors will be focusing on the outcome of the Federal Reserve’s policy meeting on Thursday, amid ongoing speculation over how close policymakers are to implementing more stimulus measures.
Market participants will also be eyeing Wednesday’s German court ruling on the constitutionality of the European Stability Mechanism.
Gold prices have rallied in recent weeks, climbing nearly 8% since August 15, amid growing hopes policymakers in the U.S., Europe and China will introduce fresh easing measures to prop up their respective economies.
Expectations of monetary stimulus tend to benefit gold, as the yellow metal is seen as a safe store of value and inflation hedge.
Elsewhere on the Comex, silver for December delivery settled at USD33.72 a troy ounce by close of trade on Friday, the highest since March 13. Silver prices rose 5.8% on the week.
Meanwhile, copper for December delivery advanced 5.1% over the week to settle at USD3.645 a pound, the highest since May 14.
Copper futures rallied more than 3.5% on Friday after China approved a USD157 billion infrastructure spending program aimed at boosting growth in the world’s second largest economy.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
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