The precious metal fell in early trading, then rebounded $60 an ounce from its session low as funds piled into gold for protection against economic uncertainty after the U.S. unemployment rate rose for the first time in 11 months.
Gold rose 3.5 percent this week, its largest gain since late January, when investors were already fretting over Spain's poor finances and a possible Greek exit from the euro zone, which could send Europe's debt crisis spiral out of control.
Bullion broke its trend of trading in sync with riskier assets, rising on a day when Brent crude oil plummeted below $100 a barrel and the Dow Jones industrial average fell 2 percent to wipe out this year's gains.
Technical buying also helped as the metal is setting up for a bullish triple-bottom chart pattern after gold held key support near $1,530 an ounce, which it held for most of this year.
Gold's rally was reminiscent of its rise earlier this year when the Federal Reserve said it would keep interest rates at zero for the next several years and indicated a new stimulus program was possible to reinvigorate economic growth.
"People are speculating that there will be some form of program coordinated by central banks, which is ultimately inflationary and gold catches a bid," said Jeffrey Sherman, commodities portfolio manager of asset manager DoubleLine Capital which oversees $35 billion in assets.
Spot gold hit a near two-week high of $1,629.41 an ounce and was up 3.9 percent at $1,624.20 at 3:11 p.m. EDT (1911 GMT), its largest one-day rally since January 2009.
Gold vaults 4 percent for biggest 1-day rise in 3 years | Reuters
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