Gold has climbed to a one-month high as a weak reading on mid-Atlantic manufacturing underlined the view that US growth may not be robust enough for the Federal Reserve to pull back on its accommodative monetary policy.
The most actively traded contract, for February delivery, on Thursday rose $US7.60, or 0.5 per cent, to settle at $US1,690.80 a troy ounce on the Comex division of the New York Mercantile Exchange, the highest ending price since December 7.
Futures had traded in negative territory earlier on Thursday, after data showed the number of US workers filing new applications for jobless benefits dropped to the lowest level in five years.
Initial jobless claims fell to 355,000 in the week ending January 12, the Labour Department said on Thursday, the latest sign of an improving labour market.
Similarly upbeat US economic data recently has spurred speculation that, should the trend continue, the Fed may end its bond-buying program earlier than expected.
Low interest rates and the Fed's bond-buying efforts have boosted investor demand for gold in recent years, as some sought the metal as a hedge against the potential inflation that increased liquidity in the financial system can bring.
Gold recovered its losses after a Federal Reserve Bank of Philadelphia report suggested the economy wasn't firing on all cylinders. The bank said business conditions for mid-Atlantic manufacturers this month unexpectedly returned to contraction.
Gold traders interpreted the data as a sign that the Fed was unlikely to pull the plug on its efforts to prop up the US economy, said Adam Klopfenstein, a senior market strategist with Archer Financial Services.
"Good news on the economy is bearish for gold," he said. "Bad news is bullish."
The Federal Reserve has set a threshold of 6.5 per cent unemployment before it would consider raising its target interest rate.
The unemployment rate stood at 7.8 per cent in December, the Labour Department said this month.
Minutes from the central bank's December meeting showed some officials favoured slowing or stopping the Fed's $US85 billion ($A80.74 billion) a month bond-buying effort well before the end of 2013.
The release of the minutes helped push gold to a four-month intraday low on January 4.
Gold extended its gains ahead of the Comex close, traders said, on further reports that the Bank of Japan (BOJ) may expand its own easing efforts.
The Nikkei reported in its Friday morning edition the BOJ was preparing to announce additional monetary easing next week.
Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $1,675.00; previous PM $1,676.25
Feb gold $1,690.80, up $7.60; Range $1,666.40-$1,697.80
Mar silver $31.810, up 26.8 cents; Range $31.050-$31.930
Apr platinum $1,700.50, up $6.40; Range $1,682.30-$1,706.50
Mar palladium $726.15, down 30 cents; Range $720.10-$729.90
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