Gold steadies ahead of US payrolls data, heads for weekly decline

By Pablo Sinha

Oct 2 (Reuters) - Gold prices were largely steady on Friday but headed for a second consecutive weekly decline, as a stronger US dollar and elevated Treasury yields weighed on bullion ahead of closely watched US payrolls data.

Spot gold held its ground at $4,181.59 per ounce by 0833 GMT, but has lost more than 2% for the week so far. US gold futures edged 0.2% higher to $4,212.

"Gold finds support ahead of the NFP report after a softer than expected PCE inflation print led to pared-back Fed rate hike bets," said Nikos Tzabouras, a senior market analyst at Jefferies-owned Tradu.com.

Data on Wednesday showed US inflation increased less than expected in August. Traders are pricing in only about a 26% chance of a rate hike this month, down from roughly 70% earlier in the week, according to the CME FedWatch Tool.

US Federal Reserve policymakers were largely divided on future monetary policy, with some staking out a case for taking in more data before deciding about another interest-rate increase, while others called for another hike to get inflation back on track.

The US central bank raised interest rates for the first time in three years last month.

The September US payrolls report is due at 1230 GMT. Nonfarm payrolls likely increased by 90,000 last month after rising 162,000 in August, a Reuters survey of economists showed.

"Investors are caught between the rising opportunity cost of holding a non-yielding asset as bond yields climb and concerns that increasingly elevated yields, against a backdrop of heavy government debt burdens, may eventually cause something to break," said Ole Hansen, head of commodity strategy at Saxo Bank.

The US dollar headed for a weekly gain, while yields on 10 and 30-year Treasuries hit their highest levels since 2002 on Thursday. USD/ US/

Spot silver climbed 0.6% to $61.21, platinum gained 0.7% to $1,735.90 and palladium rose 1.7% to $1,191.20. All three metals were poised for weekly losses.