Gold extended its rally to levels not seen in almost 8 years in New York futures trade Friday, after a disappointing report on U.S. employment weakened the dollar and made the precious metal cheaper for overseas investors. And, an analyst said, gold is poised to rise further.

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Seen as both a currency and a hard asset that can hold its value when paper investments lose money, gold gained 15 percent this year, benefiting from dollar disinvestment and worries about geopolitical instability.

Recovering from early selling at the COMEX division of the New York Mercantile Exchange, gold for February delivery touched $407.50 an once, its highest since February 1996. It beat the previous high Tuesday at $407.00 by 50 cents.

Gold investors have been steadfast buyers every time the price weakens. The $400 level become a rock solid technical support level, having been a tough psychological barrier just weeks ago.

February gold settled up $3.10 at $407.30 an ounce after bottoming at $400.50 amid profit-taking by investment banks.

“Strong buying again emerged on the lows, lifting gold higher and continuing to convince the market that the only way gold can go from here is higher,” James Moore, of TheBullionDesk.com, wrote in an e-mail. “Having convincingly held the psychological $400 (level) we can now look toward ... $415.”

Spot gold was quoted at $406.10/6.60, up from London’s afternoon fix at $402.40 and Thursday’s New York close at $402.15/85.

There was a slight lag in the reaction by currency and precious metals markets to a government report showing U.S. nonfarm payrolls rose a modest 57,000 in November, well short of the 150,000 expected by financial markets.

The five-year-old euro rose in late-morning activity to another lifetime high at $1.2169, making dollar-priced gold more affordable for European investors.

Some investors were disappointed because they had bet that the labor market had completely turned the corner with the U.S. economy. But they could take solace from a fall in the unemployment rate to 5.9 percent from October’s 6.0 percent.

They also got more good news on the U.S. manufacturing sector Friday, with a 2.2 percent jump in October factory orders, the fifth increase in 6 months.

Instead of eroding the safe-haven appeal of gold, the specter of an overheating economy has bolstered the precious metal as an inflation hedge.

“There is something freaky going on,” said a bullion dealer. “It’s just more investor buying.”

Copyright 2012 Thomson Reuters. Click for restrictions.

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