* Fed's Yellen said U.S. rate hikes likely on the way
* Gold jumped 2.8 pct on Friday as dollar dipped
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC
(Recasts, updates prices; adds comment, second byline, NEW YORK
dateline)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, June 6 (Reuters) - Gold edged up to a
two-week high and then retraced some gains on Friday, holding
steady after Federal Reserve chair Janet Yellen said she still
expected gradual U.S. rate increases.
The precious metal had rallied 2.8 percent on Friday after
surprisingly weak U.S. jobs data dampened expectations of rate
hikes from the Fed. On Monday, Yellen said interest rate hikes
were likely because "positive economic forces have outweighed
the negative" for the United States, though the weak jobs report
bears watching.
"Chair Yellen's delicate dance of emphasizing the positives
while acknowledging recent poor payrolls ... has kept gold and
other markets largely unchanged, which may have been exactly the
intention," said Tai Wong, director of base and precious metals
trading for BMO Capital Markets in New York.
"It keeps the July meeting in play and shifts focus into
June's dot plot."
Rising rates lift the opportunity cost of holding the
non-yielding metal, while boosting the dollar, in which gold is
priced.
Spot gold XAU= was up 0.02 percent at $1,244.31 an ounce
at 1:53 p.m. EDT (1753 GMT), after rising to its highest since
May 24 at $1,248.40 an ounce.
U.S. gold futures GCv1 for August delivery settled up 0.4
percent at $1,247.40 an ounce.
"The employment report didn't derail the Fed's desire to
raise rates later this year, but given the volatility observed
in the data recently, the path is still expected to be very
gradual," said Royce Mendes, director and senior economist at
CIBC Capital Markets in Toronto.
"We continue to expect a September move from the Fed."
Wall Street's leading banks unanimously expect the Fed to
leave rates unchanged this month, a Reuters poll showed prior to
Yellen's speech.
Bullion, which has gained about 17 percent this year, had
been under pressure in recent weeks as comments from senior U.S.
central bank officials, including Yellen, boosted expectations
of an imminent interest rate rise.
The dollar .DXY was slightly lower against a basket of
major currencies while U.S. equities were firm.
MKTS/GLOB USD/
"Although prices could still work a bit higher from here
over the course of the month, we think values will be hard
pressed to push above the $1,275 range over the course of June,"
said INTL FCStone analyst Edward Meir.
On Friday, holdings in SPDR Gold Trust GLD , the world's
largest gold-backed exchange-traded fund, rose to the highest
since October 2013. GOL/ETF
Silver XAG= was up 0.1 percent at $16.42 an ounce,
platinum XPT= was up 1.2 percent at $992 and palladium XPD=
was 0.6 percent higher at $556.66.
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