By Katherine Dunn

LONDON--Gold prices fell from a two-month high on Friday, as the dollar strengthened and investors awaited further clues on the strength of the U.S. economy later in the day.

Spot gold prices were down 0.34% at $1,215.40 per metric ton in midmorning trade in Europe, after closing at its highest price since mid-November on Thursday.

On Friday, the WSJ Dollar Index, which weighs the dollar against a basket of other currencies, was up 0.18%. Traders will mainly be waiting for the release later in the day of the January nonfarm payrolls data, a crucial marker of U.S. economic growth. The monthly figures will be the first released under President Donald Trump.

Economists surveyed by The Wall Street Journal expect payrolls to grow by 174,000 with the unemployment rate unchanged at 4.7%.

Earlier in the week, the U.S. Federal Reserve met but didn't raise interest rates, as expected, but didn't give further guidance on when a series of expected rate increases will arrive. In December, Fed officials said they would raise rates to between 0.50% and 0.75%.

With strong economic data, those expectations are still on track, said Bernard Dahdah, a metals analyst at Natixis.

"Unless there's a very nasty surprise, we're on track to a rate hike in June," Mr. Dahdah.

Rising interest rates are typically bearish for gold, which doesn't bear interest and so struggles to compete when rates rise.

That pressure could dampen support for the metal long-term, continuing a decline that pushed prices to 10-month lows in December following the U.S. presidential election.

Mr. Trump's victory was followed by a rally in the U.S. dollar and equities, partly based on the president-elect's campaign promises to lower taxes and reduce regulation.

Amid political uncertainty in the president's second week in office, however, "a lot of investors are now questioning that Trump trade," said Alistair Hewitt, head of market intelligence at the World Gold Council.

If the dollar softens and political uncertainty rises, gold could benefit as a haven asset. The metal has risen 5.55% since the start of the year.

On Friday, the World Gold Council said in a report that demand for the precious metal rose 2% in 2016, pushed higher by inflows into gold exchange-traded funds (ETFs). However, those gains were dampened by weak demand from the jewelry market and central banks, the council said.

The other precious metals were lower on Friday. Silver was down 0.42% at $17.35 a troy ounce, palladium was down 1.23% at $749.75 a troy ounce, and platinum was down 0.23% at $997.30 a troy ounce.

Riva Gold contributed to this article.

Write to Katherine Dunn at Katherine.Dunn@wsj.com

(END) Dow Jones Newswires

February 03, 2017 06:12 ET (11:12 GMT)

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