SEPTEMBER 3, 2010, 3:36 P.M. ET.

Gold Prices Ease Back .

By MATT WHITTAKER

NEW YORK—Gold futures lost ground as a stronger-than-expected U.S. jobs report dulled some of the metal's safe-haven allure, but a weaker dollar checked those losses.

The most actively traded gold contract for December delivery fell $2.30, or 0.2%, to settle at $1,251.10 a troy ounce on the Comex division of the New York Mercantile Exchange.

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U.S. government numbers showed total nonfarm payrolls fell only 54,000 in August as Census workers lost their jobs, while private payrolls were up 67,000. Economists had expected a top-line loss of 110,000 and private jobs to be up about 28,000.

Gold is often considered a safe-haven investment because it isn't as linked to economic cycles as more industrial materials like copper and oil, or equities, which represent a proxy for the economy. So the metal can come under pressure when investors feel more confident about the economy.

"The reaction in gold is based on the fact that [the data] were better than expected," said Tom Pawlicki, an analyst with MF Global in Chicago.

The gold market had been inching higher earlier in the week, in part on jitters about the closely watched jobs report. That left room for the more-robust-than-expected reading to pressure the metal.

"Gold has been kind of the safe-haven play recently," said Dan Cook, Chicago-based senior market analyst with brokerage firm IG Markets.

As investors' desire for refuge investments waned on the data, they came out of the dollar as well as gold. That ended up helping the metal as the dollar fell against most of its rivals while participants favored higher-yielding currencies.

A weaker dollar tends to support dollar-denominated gold by making the metal less expensive for buyers using other currencies, helping demand. Shortly after gold closed, the ICE Futures U.S. Dollar Index was down 0.5%.

After selling off to $1,239.20, the metal was also able to pare losses as some participants wanted to keep some of their safe-haven holdings ahead of the long Labor Day holiday weekend in the U.S., Mr. Cook said.

Mr. Pawlicki noted that although the overall jobs report was more muscular than expected, there were still some troubling signs that also helped keep gold's losses in check.

He noted that the unemployment rate edged up to 9.6%, as expected, after holding at 9.5% for previous two months, and manufacturers shed 27,000 jobs, after adding 34,000 the previous month.

Other precious metals traded in New York, which are more widely used for industrial purposes than gold, settled higher. Comex December silver finished 1.4% higher after hitting its strongest point since July 2008. Nymex October platinum gained 0.6%, and December palladium added 1.2%.

Write to Matt Whittaker at matt.whittaker@dowjones.com

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