By Jan Harvey
LONDON (Reuters) - Gold edged up after two days of losses on Friday, but remained hemmed in a narrow range ahead of key U.S. payrolls data later in the session and its implications for U.S. monetary policy.
A strong reading could boost expectations that the Federal Reserve will lift interest rates sooner rather than later, a move that would be bearish for non-yielding gold. [MKTS/GLOB]
Gold prices are highly sensitive to U.S. rate expectations, and have fallen more than 5 percent since minutes from a Fed meeting indicated in mid-May that a summer rate hike may be on the table. They hit a 3-1/2 month low of $1,199.60 on Monday.
Spot gold was up 0.1 percent at $1,211.70 an ounce at 1130 GMT, while U.S. gold futures for June delivery were $1.20 an ounce higher at $1,213.80.
"Trading volume is low ahead of the U.S. non-farm payrolls data," Naeem Aslam, chief market analyst at Think Forex, said. "Traders will gauge this very closely and they will relate this to the Fed sentiment."
"If you look at the odds for a June interest rate hike, they have started to fade again," he said. "If the U.S. NFP data is immensely strong today, the odds could tilt once again in favour of the Fed."
World shares rose towards their highest in a month on Friday, although concerns about rising prospects of a near-term U.S. rate hike kept activity subdued. [MKTS/GLOB]
Gold demand in Asia, home to the world's biggest consumers of physical gold, was muted this week as a slight increase in India and Japan was offset by reductions in other trading centres as buyers awaited further price declines. [GOL/AS]
"There hasn't been much movement in the physical aspect of gold, with investors preferring to watch from the sidelines (as) they are expecting a rate hike," Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central, said.
Gold has fallen for the last four weeks, under pressure from comments from senior U.S. central bank officials, including chief Janet Yellen, which boosted expectations of an imminent rate rise. However, it remains up 14 percent so far this year.
Among other precious metals, platinum was up 0.9 percent at $960.30 an ounce after earlier touching its lowest since April 8 at $950 an ounce.
Silver was up 0.6 percent at $16.08 an ounce, while palladium was up 0.7 percent at $536.50 an ounce.
(Additional reporting by Koustav Samanta and Vijaykumar Vedala in Bengaluru; Editing by Susan Fenton)
