Gold Prices Squeeze Out Gains

NEW YORK (TheStreet ) -- Gold prices settled slightly higher Friday on the back of a lackluster government jobs report and as investors adjusted their positions ahead of the long weekend.

Gold for August delivery settled $1 higher to $1,207.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Friday has traded as high as $1,214 and as low as $1,198.80 on thin volume. The U.S. dollar index continued its decline, slipping 0.29% to $84.47 while the euro continued its gains adding 0.06% to $1.25 vs. the dollar. The spot gold price Friday was rising more than $8, according to Kitco's gold index.

Investors were opting for physical gold over paper gold as traders unwound some of their future contracts ahead of the holiday weekend. An uneventful U.S. nonfarm payrolls report also helped to keep demand tame.

The Labor Department said the unemployment rate for June slipped to 9.5%, which was positive news -- economists were expecting the unemployment rate to rise to 9.8%. However, nonfarm payrolls declined by 125,000 in June, reflecting a decrease in the number of temporary employees working on Census 2010. Only 83,000 private sector jobs were added last month, which was weaker than expected. A substantial amount of bad news was already priced into the market headed into the report, so investors had little need to rush into gold as a safe haven asset.

Gold prices plummeted almost 3% Thursday after a slew of disappointing U.S. economic data hit as well as a successful $4.3 billion bond auction in Spain. The surprise shift of good news out of the eurozone and bad news from the U.S. ignited a euro rally and dollar selloff that led investors to unwind their safety hedges in gold.

Gold Prices Tank

Many traders had been betting against struggling European economies by shorting the euro and buying gold. As fear abated, they were forced to adjust their trades. However, the popular gold exchange-traded fund, SPDR Gold Shares(GLD), shed a little more than a ton Thursday on gold's big selloff as the majority of investors appeared to stay committed to the precious metal for the long-term.

Traders are also rebalancing their portfolios ahead of a long U.S. holiday weekend. Traditionally, investors on Fridays have been opting for cash rather than stocks and commodities to protect them against headline risk, which might temper gold's upside. But a weak dollar and traders looking to buy gold at a "discount" could push prices higher.