May 8 (Bloomberg) -- Gold slipped as the U.S. jobless rate rose, reviving concern that a slowing economy may spur deflation and erode the appeal of precious metals as hedges against inflation. Platinum and silver also fell. Palladium gained.

The U.S. unemployment rate climbed to 8.9 percent, the highest since September 1983, even as employers cut fewer jobs in April than in the previous month. About 539,000 workers joined the jobless ranks last month, compared with 699,000 in March, the Labor Department said today in Washington. Some investors buy precious metals as hedge against inflation.

“The unemployment numbers are still very bad, indicating weak economic prospects near term,” said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. “The market is still trying to set a little bit of a base here and may try to run higher if the deflation scenario is taken out. The economy is trying to turn a corner.”

Gold futures for June delivery slipped 60 cents, or 0.1 percent, to $914.90 an ounce on the Comex division of the New York Mercantile Exchange. Gold climbed 3 percent this week.

Gold probably may reach $950 to $960 in a “couple weeks,” Platt said. “The dollar is playing a role here,” he said.

The U.S. currency tumbled to a six-week low against the euro following the jobless report as demand slipped for the safety of the greenback. U.S. equity indexes climbed.

“Gold is bumping up against resistance levels near $926 and could even attempt a breakout towards a test at levels near $960, but it has been doing so on stock-market shadowing, rather than a flight to safe havens,” Jon Nadler, a senior analyst at Kitco Inc. in Montreal, said today in a report. “The broad $850-$950 price range remains in place.”

Dollar Weakens

The dollar lost as much as 1.8 percent against the European currency to trade at $1.3628 per euro in New York, the weakest since March 26. The euro fetched $1.339 yesterday.

Silver futures for July delivery fell 7.5 cents, or 0.5 percent, to $13.955 an ounce in New York. The most-active contract still jumped 12 percent this week, the biggest weekly gain since Sept. 19.

Platinum futures for July delivery slid $10.20, or 0.9 percent, to $1,147.10 an ounce on the Nymex. The most-active contract still advanced 4.6 percent this week.

Palladium futures for June delivery rose 60 cents, or 0.2 percent, to $242.30 an ounce in New York. Palladium surged 13 percent this week, the biggest such gain since October.

Most platinum and palladium are used in pollution-control devices for cars and trucks.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.

Last Updated: May 8, 2009 15:07 EDT