* April U.S. non-farm payrolls rose less than expected
* Gold on track to finish week down 0.5 pct
* Fed's Dudley says two 2016 rate hikes "reasonable"
(Updates prices; adds comment, second byline, NEW YORK)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, May 6 (Reuters) - Gold jumped 1 percent on
Friday after U.S. non-farm payrolls data for April came in
weaker than expected, boosting expectations the Federal Reserve
will delay further interest rate increases.
Bullion prices pared gains later in the session as the U.S.
dollar .DXY turned higher against a basket of major currencies
and New York Fed President William Dudley told the New York
Times that two rate hikes in 2016 remain a "reasonable
expectation." USD/
The Labor Department report showed the U.S. economy added
160,000 jobs in April, the fewest in seven months, and Americans
dropped out of the labor force in droves, signs of weakness that
cast doubts on whether the Fed will lift rates before the end of
the year.
Spot gold XAU= hit a high of $1,295.70 an ounce after the
data and was up 0.8 percent at $1,287.51 an ounce at 2:48 p.m.
EDT (1848 GMT). It was on track to close the week down 0.5
percent in sharp contrast to last week's biggest increase since
early February.
U.S. gold futures GCv1 for June delivery settled up 1.7
percent at $1,294 an ounce.
Spot prices are up 21 percent this year on expectations the
Fed will delay further rate hikes. Gold is highly sensitive to
rising rates, which lift the opportunity cost of holding
non-yielding bullion.
"The report won't satisfy the Fed's criteria for hiking
rates in June and is another disappointment for markets," said
Royce Mendes, director and senior economist at CIBC Capital
Markets in Toronto, in a note.
"With consumption expected to rebound in the second quarter,
the Fed should be in a position to raise rates again in
September."
U.S. short-term interest rate futures contracts rose after
the payrolls data, suggesting traders see a better chance the
Fed will wait longer to act.
"Anybody who was thinking there was going to be a June rate
hike is probably going to be disappointed," Citi analyst David
Wilson said.
Stock markets worldwide dipped after the data, which added
to economic growth concerns, and short-dated Treasury yields
sank. MKTS/GLOB
Investor sentiment toward gold showed signs of optimism.
Assets of SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, rose to the highest in over two years on
Thursday at 829.44 tonnes.
Among other precious metals, silver XAG= was up 0.7
percent at $17.44 an ounce, platinum XPT= was up 1.7 percent
at $1,075.34 and palladium XPD= was up 1.6 percent to $606.33.