Yet another factor lending support to the precious complex was comments from Israel's deputy prime minister warning that the country would attack Iran if the latter pursues nuclear-weapons programs, a couple of traders said.
Gold drew both fresh speculative buying as well as short covering after the metal hit a three-week low on Thursday.
August gold settled $23.50 higher to $899 an ounce on the Comex division of the New York Mercantile Exchange. July silver rose 26 cents to $17.43.
"It's largely a factor of the dollar falling down after the unemployment report," said Michael Gross, broker and futures analyst with OptionSellers.com. "With the dollar falling, people are going to be concerned about inflation again and that is going to bring speculators back into the gold market."
August gold has bounced since putting in a $867.70 bottom early Thursday as the euro matched the May 12 low of $1.5367 on comments during the week from Federal Reserve Chairman Ben Bernanke expressing concern about inflation and suggesting dollar weakness was contributing to this.
But the euro and gold began snapping back Thursday when European Central Bank President Jean-Claude Trichet said it was possible policy setters there would hike interest rates next month in response to their own inflation concerns. Expectations that the spread in interest rates could widen in favor of Europe over the U.S. has returned, said Bart Melek, global commodities strategist with BMO Capital Markets Global Futures.
"When there was sentiment the Fed was stopping (cuts), there was still some semblance of belief that the ECB might later in the year some time lower rates," Melek said. "That certainly looks unlikely now. The market is perceiving interest rates in Europe might move higher sooner rather than later."
The euro and metals rallied further Friday when the monthly jobs report was seen as delaying any potential Fed tightening. The single European currency was around $1.5745 shortly before the Comex gold pit closed.
U.S. non-farm payrolls fell 49,000 in May, when the consensus expectation had been for a 60,000 decline. The jobless rate rose to 5.5% from 5% in April, the biggest one-month jump since 1986. Economists were expecting a smaller rise to 5.1%.
George Gero, vice president with RBC Capital Markets Global Futures, also cited the surge in crude oil along with the softer dollar and "Mideast saber rattling." July crude hit a Nymex spot-month record $137.70 a barrel.
Gero reported "heavy" short covering, in particular by options traders amid market talk that oil could hit $150 a barrel shortly. A Morgan Stanley analyst said oil could hit $150 by July 4.
The fact that central bankers are worried about inflation to begin with is yet another factor underpinning gold, Melek said.
"I suspect the market is more and more weighing in on inflation," Melek says. "Gold is not just a one-trick pony that responds to the euro-U.S. dollar relationship. It is also a historical hedge against inflation."
Additionally, weakness in U.S. equities may also be underpinning gold, as investors sometimes also turn to it as a hedge against negative equity-market volatility, Melek added.
August gold got as high as $902.80, stopping just above the 20-day moving average around $900.40 but just below the 50-day average of $904.90.
Silver also rose, although not as dramatically as gold.
"As a knee-jerk reaction, people buy gold first and everything else later," Gross said. "But I would expect silver will eventually catch up."
Silver had outperformed gold Thursday when it broke through resistance at a series of recent highs slightly on either side of $17 an ounce. On Friday, July silver moved above its 20-day moving average near $17.27 and the 50-day average of $17.34.
Meanwhile, July platinum rose $68.80 to $2,081.30 an ounce, while September palladium gained $6.40 to $433.80.
"They're following gold and silver in a continuation from yesterday's short covering," said one trader. "Then it got a boost from the comments out of Israel about protecting themselves from Iran's nuclear capabilities."
Another trader added that uncertainty about South African Power availability during the winter there was supportive for platinum, in particular, in case electrical shortages should curtail mining output.
Technically, July platinum broke above the 50-day moving average of $2,036.30 and the June 3 high of $2,047.70. It got as high as $2,095, its strongest level since May 28, losing momentum just above its 20-day average of $2,090.40.
