LONDON, Feb 5 (Reuters) - Gold and base metals won respite from falls to multi-month lows on Friday after U.S. data showed signs that labour market improvement might be starting to take root.
But sentiment remained bruised by the dollar's strength. Industrial metals were also dogged by wider concerns about growth stemming from the euro zone's fiscal problems.
Oil recovered some poise, consolidating from its biggest one-day drop since July, supported by the U.S. jobs data, after oil-focused hedge fund BlueGold denied what it said were false rumours about its operations and said it was not behind a sharp rise in volatility in recent days.
U.S. employers unexpectedly cut 20,000 jobs in January, but the unemployment rate surprisingly fell to a five-month low of 9.7 percent, according to a report on Friday.
"Right now the market likes this data. But the buzz from the sugar high on this may wear off later in the day," said John Brady, broker at MF Global in Chicago.
Investors in wider markets have grown more risk averse, with European Central Bank President Jean-Claude Trichet's stark assessment of problems facing some euro zone economies taking its toll on the euro and by extension commodities.
"We thought all the financial factors that were driving commodities up last year would move in reverse, so that's a dollar story and an equities story," Deutsche Bank analyst Michael Lewis said.
Spot gold bounced after the U.S. data, but the market was still struggling to keep some traction after hitting three month lows earlier with the dollar weighing heavily. It was at $1,054 an ounce at 1519 GMT from $1,062.60 late on Thursday.
London Metal Exchange copper cut losses to trade at $6,300 a tonne, but was still also close to its lowest in more than three months.
"Losses have been driven by risk aversion, you have the dollar quite strong and there are a lot of concerns about debt conditions in Europe and potentially elsewhere," said Dan Brebner, analyst at Deutsche Bank.
"There was a significant amount of confidence in the U.S. economy. Investors are questioning that ... There's an element of panic behind the selling."
OIL RALLIES
Oil rose above $73 per barrel, consolidating after its biggest one-day fall since July. It was last down 54 cents to $72.60 a barrel.
Traders said the stronger dollar -- which tends to move inversely to many commodities because they are priced in the U.S. currency -- as well as worries about the health of the euro zone and weaker equities were a powerfully negative combination.
"We expect the supply demand balance to continue to tighten in 2010 as the global economic recovery continues to strengthen demand, draw inventories and draw OPEC spare capacity back into the market," Goldman Sachs said in a note.
The market gained some support from oil-focused hedge fund BlueGold's denial of what it said were false rumours about its continuing operations.
Rumours over the health of an unidentified hedge fund were cited as a negative factor on Thursday as the oil market fell.
Carsten Fritsch, analyst at Commerzbank in Frankfurt, said oil and commodities markets faced a "toxic mix" of factors including falling stock markets and rising risk aversion.
"Bearish sentiment prevails across all commodities. The pessimism is very strong. Anything at all risky is being sold."
