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Bullion has climbed 1.4 percent so far this week, its best such rise in four weeks, after Federal Reserve Chair Janet Yellen said that the U.S. central bank should proceed only cautiously as it looks to raise interest rates.

Gold is sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets, while boosting the dollar.

However, better-than-expected payrolls data could revive expectations of higher U.S. rates, strengthen the dollar and hurt gold. U.S. payrolls due later on Friday are expected to grow by 205,000, according to a Reuters poll.

Spot gold gained 0.1 percent to $1,233.30 an ounce by 0705 GMT, following a 0.6 percent rise overnight.

"If we start to see macro readings out of the United States pick up a head of steam (with a strong jobs number helping) this could prompt a change in the current thinking that the Fed will remain dovish for a long while," INTL FCStone analyst Edward Meir said in a note.

A robust number could instead revive expectations that an interest rate hike in June is possible, Meir said.

U.S. economic data will remain in focus as investors try to gauge the strength of the economy and its impact on monetary policy.

We have entered a new and unprecedented phase in monetary policy. Central banks in Europe and Japan have now implemented Negative Interest Rate Policies (NIRP). The long term effects of these policies are unknown, but the World Gold Council see discouraging side effects: unstable asset price inflation, swelling balance sheets and currency wars to name a few. Amid higher market uncertainty, the price of gold is up by 16% year-to-date – in part due to NIRP.

History shows that, in periods of low rates gold returns are typically more than double their long-term average. Looking forward, government bonds are likely to have limited upside, due to their low-tonegative yields and, in our view, would be less effective than gold in mitigating risk, ensuring portfolio diversification, and helping investors achieve their long-term investment objectives. Portfolio analysis suggests that gold allocations in a low rate environment should be more than twice their long term average.

"We believe that, over the long run, NIRP may result in structurally higher demand for gold from central banks and investors alike," according to WGC.

Reference : Reuters, Commodities Now, World Gold Council