) --

Gold prices

jumped Friday as a weak U.S. jobs report sent investors running for cover in gold.

Gold for February delivery rose $16.90 to $1,406.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,409.90 and as low as $1,385.30 during Friday's session.


U.S. dollar index

was losing 1.07% to $79.41 while the euro added 1.13% to $1.33 vs. the dollar. The spot gold price was hopping $23.70, according to Kitco's gold index.

Gold prices reached for new highs Friday on the back of a really disappointing November U.S. unemployment report. Investors sought the safety of the precious metal as the Labor Department reported that nonfarm jobs increased 39,000 while the private sector added 50,000 jobs. The unemployment rate rose to 9.8%, the highest level since April. All the results were significantly below expectations.


I expect that traders think recovery is not around the corner after this," says George Gero, senior vice president at RBC Wealth Management, in a interview earlier in the day. "Disappointing jobs

will dominate today's action

and we could have record prices."

Gero is looking for a wide range of $1,350 to $1,425 as traders may choose to allocate their assets on dollar weakness. He also pointed out that price swings on Friday can be deceiving as traders must even out their positions, cover shorts, and volume could be light.

Gold's record close was back on Nov. 9 when the prices settled at $1,410.10 an ounce. Despite failure to close above this level on Friday, momentum traders might see the rally as a green light to buy. Any huge run up, however, is always subject to the risk of profit-taking especially if traders need cash to cover losses in stocks.

Gold prices are also finding support as

the euro gained on better-than-expected October retail sales from the 16 eurozone nations as well as speculation that the European Central Bank was buying Portuguese and Irish bonds


Despite the fact that ECP President Jean-Claude Trichet did not deliver a shock-and-awe attack on debt problems during the central bank's meeting on interest rates, the news that the ECB was not abandoning the EU nations and was trying to support the euro calmed jittery investors for the near term.

Video: Ireland's Effect on the Euro >>

The news propped up the euro, weighed on the dollar and helped gold. "How much higher do we go when every other commercial on TV or in print publications talk about the importance of buying or selling gold," says Sam Stovall, chief investment strategist at Standard & Poor's equity research division. "Our view from a technical perspective is that we could eclipse the $1,500

level in the next couple of months and longer term we don't think that $2,000 per ounce is out of the question."

Stovall cites the recurring debt worries around the globe as highlighting gold's appeal as a safe haven asset. In addition, with interest rates historically low, investors' rate of return on cash is also low which makes gold attractive as a higher store of value despite the fact that it doesn't pay a dividend.

However, low interest rates may not continue forever. According to reports from


, the Chinese state run newspaper, the Politburo, the crème de la crème of the Communist party, is throwing its support behind a more "prudent" growth strategy. Fiscal policy will still be "proactive" meaning that investment spending would still be encouraged but that a loose monetary plan was no longer desired.

This paves the way for interest rate increases from the central bank, the most aggressive way to combat inflation. Already this year the People's Bank of China has tried to decrease the amount of money in circulation by raising the amount of yuan banks must hold in their reserves. The moves haven't had the desired effect, however, as inflation is now 4.4% higher than a year ago.

A rise in interest rates would damage inflation expectations and might force some traders who were buying gold as a hedge to rethink their positions. Also, a higher borrowing rate might hurt gold investment and physical demand, which has been instrumental in higher prices.


also reported Thursday that China imported 209.7 metric tons in the first 10 months of 2010, equivalent to 7.4 million ounces. The figure beats the gold exchange-traded fund,

SPDR Gold Shares

(GLD) - Get Report

, which only added 164.36 tons, or 5.8 million ounces, in the same time period. Any substantial slowdown in purchasing power and gold demand would severely weigh on prices.

Adrian Ash, head of research for

argues that China's central bank would have to "raise interest rates by a long way before it really makes a difference for cash savers."

James Moore, analyst at

, also predicts that gold prices will continue to find support from safe haven and physical buyers but that "with risk appetite increasing the more industrial metals are likely to perform more strongly."

Silver prices

added 69 cents to $29.25 while copper closed 2 cents higher to $3.99.

Image placeholder title

Gold mining stocks

, a risky but potentially profitable way to

buy gold

, were rallying.

Freeport McMoRan Copper & Gold

(FCX) - Get Report

was up 0.78% to $108.48 while


(NG) - Get Report

was 3.16% higher at $14.94. Other gold stocks

Gammon Gold



Hecla Mining

(HL) - Get Report

were trading at $7.70and $10.36, respectively.

Randgold Resources

(GOLD) - Get Report

was trading down 0.74% to $93.55. Oriel Securities downgraded Randgold Friday to reduce from hold citing concerns that the company will miss its full-year production guidance of 445,000 ounces of gold. Oriel blames rising tensions in the Ivory Coast which could disrupt production at its mines in the area.

On Nov. 8, Randgold started production at its new Tongon mine in the region, which has the potential to produce 300,000 tons a month when it is operating at full speed.


Written by Alix Steel in New York.

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