Gold hit session highs on Friday as the dollar tumbled on disappointment with a monthly jobs report from the United States, which showed the economy created far fewer jobs than expected. Spot gold touched a peak of $1,546.39 a troy ounce.
It was bid at $1,544.20 at 1314 GMT from $1,532.55 an ounce late in New York on Thursday. The precious metal hit a record high of $1,575.79 on May 2.
U.S. employment rose far less than expected in May to record its weakest reading since September, while the jobless rate rose as high energy prices and the effects of Japan's earthquake bogged down the economy.
"This is gold-friendly data ... (it) points to a slacking U.S. economy. In the worst case scenario, we could have a double-dip in the U.S. economy and possibly deflation, which would also help gold," said Robin Bhar, analyst at Credit Agricole.
"The weaker dollar is also helping gold. We should see gold moving to recent highs or even to new highs if we see more risk-averse news."
Positive investor sentiment was also reinforced by a warning from Moody's that it would consider cutting the United States' triple-A credit rating if there is no progress on debt talks.
"The market is fixated on ... the U.S. credit rating and U.S. growth," said Ross Norman, chief executive at bullion brokers Sharps Pixley.
"Essentially gold is benefitting from the ugly contest. The dollar is ugly, the euro is ugly and compared to them gold looks comparatively pretty."
Investors use gold as a hedge against political and economic insecurity and inflationary pressure. It typically moves in the opposite direction to the dollar, which when it falls makes commodities cheaper for holders of other currencies.
However, gold earns no interest or dividends, and so during times of normal monetary condition there is an opportunity cost to holding gold.
TACKLE UPSIDE
Investor interest in gold has also been boosted by fears of a Greek debt default and the contagion effects on other euro zone countries such as Ireland and Portugal.
Greece is set to impose a deeper bout of austerity on its struggling economy and promises to speed up a privatisation drive in return for a new international bailout to avoid a debt default.
"There is still a lot of uncertainty over Greece's potential bailout, and we shall see more reassuring comments from policymakers in the euro zone in the near future, though it is clear that debt restructuring remains only the very last resort for Athens," VTB capital said in a note.
"Naturally, the risk aversion will have to escalate further for gold to tackle the upside and much will depend on macro numbers today."
Technical resistance is initially seen at $1,550 an ounce and support at $1,530.
Spot silver touched $35.34 an ounce, its lowest since May 24. It was last at $35.75 from $36.17 late on Thursday.
Investors fled from silver after exchange operators in Shanghai and New York increased margins, or the amount of money they require to trade silver futures.
Weak fundamentals reinforced the sell-off, which has seen silver fall from a $49.51 an ounce hit on April 27.
Platinum at $1,807.00 from $1,809.60 and palladium at $768.72 from $767.05.
