 "Gold heads for best week in five months on softer dollar, yields")
By Brijesh Patel
(Reuters) - Gold prices on Friday hovered near a 2-1/2-month high and were on track for their best week in five months, aided by a weaker dollar and a pullback in Treasury yields as investors cautiously await U.S. non-farm payrolls report due later in the day.
Spot gold was steady at $1,815.88 per ounce by 0246 GMT, after hitting its highest since Feb. 16 at $1,817.90 in the previous session. Bullion up more than 2.5% so far this week.
U.S. gold futures were little changed at $1,816.40.
"The weaker dollar and U.S. Treasury yields dropping below 1.6% has helped gold prices to go above $1,800," Brian Lan, managing director at dealer GoldSilver Central said.
"The U.S. jobs data is very important point ... if data comes out really good, we can see people being more positive on the economy and it might lead to Federal Reserve increasing the interest rates earlier than expected, which will impact gold."
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The dollar index slipped to a one-week low against its rival, making gold less expensive for other currency holders, while benchmark U.S. 10-year Treasury yields hovered close to a two-week low.
Lower bond yields generally reduce the opportunity cost of holding non-interest bearing gold.
Market participants await U.S. monthly jobs report due at 08:30 a.m. EST to gauge the Fed's strategy on monetary support going forward. Economists expect 978,000 new U.S. jobs for April, according to a Reuters poll.
Data on Thursday showed weekly U.S. jobless claims dropped to a 13-month low.
The economic outlook is brightening, but more improvements are needed before the Fed will start to scale back monetary support, Cleveland Fed Bank President Loretta Mester said.
Elsewhere, palladium rose 0.5% to $2,960.06 per ounce, after hitting an all-time high of $3,017.18 earlier this week.
Silver gained 0.3% to $27.26 per ounce and was up more than 5% this week. Platinum was steady at $1,252.24.
(Reporting by Brijesh Patel in Bengaluru, Editing by Sherry Jacob-Phillips)