Gold at two-month low as U.S. jobs rise makes rate hike likely

By Eric Onstad

LONDON (Reuters) - Gold hit a two-month low on Friday after stronger than expected United States jobs data increased the likelihood of another U.S. interest rate increase.

U.S. non farm payrolls jumped by 222,000 jobs last month, the Labor Department said on Friday, beating expectations of a 179,000 gain.

"We have a stellar U.S. jobs number," said Naeem Aslam, chief market analyst at Think Markets.

"The data has brought negative news for gold traders as there isn't really anything in this number which is going to put the brakes on an interest rate hike."

Spot gold was down 0.7 percent to $1,215.81 per ounce by 1336 GMT, after touching an intraday low of $1,214.40, the weakest since May 9. It has dropped about 2 percent this week and is set for its biggest weekly fall since the week of May 5.

U.S. gold futures for August delivery fell 0.6 percent to $1,215.50 per ounce.

Gold has shed about 6 percent since touching a seven-month peak of $1,295.97 on June 6.

The dollar index was firmer, making gold more expensive for buyers outside the United States.

Dollar-denominated bullion typically loses value when the greenback and interest rates rise as it does not pay interest.

UBS expects another U.S. rate hike in September, the bank's precious metals strategist Joni Teves said.

"Both nominal and real rates have been ticking higher and that's been putting gold under pressure," she added before the jobs data.

Silver fell 1.3 percent to $15.80 per ounce.

It had earlier touched $14.86 an ounce, its lowest in 15 months, a move traders said appeared to have been driven by an accidental order. The metal is down 4.2 percent on the week.

Palladium fell 0.3 percent to $832.25 per ounce after hitting its lowest since June 2 earlier in the session.

Analyst Carsten Menke at Julius Baer in Zurich said palladium is likely to be pressured due to struggling car sales in the United States and China, the world's two biggest markets.

"We see palladium prices trading above fundamentally justified levels," he said in a note.

Platinum dropped 0.8 percent to $902.74 per ounce. It is down about 2 percent so far this week.

(Additional reporting by Nithin Prasad and Vijaykumar Vedala in Bengaluru; editing by Biju Dwarakanath/David Clarke/Alexander Smith)