Gold dropped on Friday ahead of the release of US jobs data that could offer clues to the direction of the US dollar and precious metals. Friday’s employment report, expected to show the economy sheds jobs in March for a third straight month, will be scrutinised for clues about US interest rate moves, as well. Lower rates elevates gold’s appeal as an alternative investment. Gold dipped to $901.60 an ounce on Thursday, when it gained more than $5 to track a rally in platinum. Gold hit a two – month low of $872.90 an ounce on Tuesday on fund selling before performing a modest rebound. It was still 12 percent lower than last month’s lifetime high of $1,030.80 and dealers said jewellers showed buying interest at the lows.

The dollar steadied against the yen on optimism that financial markets may be regaining stability, offsetting worries somewhat about the US economy before the payrolls report. The dollar had fallen against the euro and the yen on Thursday after data showed first – time applications for US jobless benefits rose last week to a 2.5 year high, renewing worries that the US economy has stalled. But traders said some market players were betting that Friday’s jobs data would only support expectations for a Federal Reserve rate cut later this month, though there was a risk that a worse – than – expected result could renew expectations for a big Fed rate cut and hit the dollar. The US currency has rebounded this week, recovering from a record low against the euro and a 13 – year versus the yen on growing optimism that the worst of the credit crisis was over despite depressive remarks on the economy by Fed Chairman Ben Bernanke. Traders said the strength of the dollar’s gains will be tested by the employment report due on Friday. Late on Thursday, San Francisco Fed President Janet Yellen commented on the economy made by Bernanke earlier this week, saying the US economy has “all but stalled and could contract” in the first half of 2008. Interest rate futures suggest traders see an 80 percent chance the Fed will lower its fed funds target by 25 basis points at its policy meeting later this month, with a 20 percent chance of a 50 basis point cut. The Fed has cut its interest rates since September by a total 3 percentage points to 2.25 percent, to deal with the credit crisis and preserve the economy from an ailing housing sector.

Oil bounced above $104 a barrel on Friday, recovering from losses in the previous session due to concerns over US oil demand. Oil prices fell on Thursday after US government data showed jobless claims last week had risen to their highest since 2005, signalling that the US economy was deteriorating. US oil demand this year is lagging last year’s consumption as soaring energy prices trouble consumers already hit by a credit crunch and housing slump. Oil demand in the world’s top energy consumer over the first 13 weeks of the year was down more than 479,000 barrels per day compared with a year ago. OPEC was concerned about the possible dip in US oil demand and had planned an informal meeting in Rome this month to discuss the issue. On Friday, traders await a key US payrolls, which will further shape perceptions of US oil demand and affect dollar movements. The dollar’s weakness in past months, which had lifted nominal prices of commodities denominated in the currency, had prompted fund flows into crude oil. In Nigeria, a fire at Royal Dutch Shell’s major oil export pipeline blazed on for a fifth day, but output and exports were unaffected, a Shell spokesman said on Thursday. Similar pipeline fires at Shell’s pipeline last year led to partial losses of supplies from Africa’s largest oil exporter.