By MATT DAY

NEW YORK—Gold futures ticked higher as improvement in the U.S. labor market drew investors to the precious metal and the U.S. dollar.

The most actively traded gold contract, for February delivery, recently rose $7.80, or 0.5%, to $1,627.90 a troy ounce on the Comex division of the New York Mercantile Exchange.

The U.S. economy added 200,000 jobs in December, the Labor Department said on Friday, beating expectations for an increase of 155,000. The report was the latest in a series of mostly upbeat readings on the U.S., suggesting the world's largest economy was chugging along despite weakness in Europe and worries about top commodities consumer China.

"We're seeing capital flow into the dollar and into the U.S." in response, said Frank Lesh, a broker with FuturePath Trading. Investors concerned about Europe's debt crisis may see value in gold after the metal's recent declines, Mr. Lesh said.

Gold slipped by 10% in December, and during the last four months erased much of 2011's record-high prices above $1,900 as traders preferred the flexibility of cash instead of precious metals. Investors looked to moves in the euro as a gauge of the health of Europe's financial system, frequently selling gold when the European common currency fell.

But that relationship showed signs of breaking down this week, with both gold and the dollar rising. The euro was recently at $1.273 versus $1.279 late Thursday.

That decoupling may be a sign of renewed strength in the gold market, said Jim Steel, an analyst with HSBC, in a note. He added that low gold prices compared to the market's recent highs may be stimulating physical gold demand in emerging markets.

Gold futures ended on Thursday at their highest price in three weeks, as investors saw a bargain in the metal after December's declines. Others sought gold to shield their wealth as political tensions mounted ahead of a potential European oil embargo targeting Iran.

Write to Matt Day at matt.day@dowjones.com

Source: http://online.wsj.com/article/SB10001424052970203471004577144534160378016.html