* Gold pares gains as U.S. dollar turns positive
* Gold on track to end week slightly higher
* Silver hits two-week high (Updates prices; adds comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Zandi Shabalala
NEW YORK/LONDON, Sept 2 (Reuters) - Gold rose more than 1 percent on Friday after U.S. jobs growth came in below expectations, dampening the likelihood of an interest rate hike from the Federal Reserve this month, but bullion pared gains after the dollar turned positive.
U.S. jobs increased by a slower-than-expected 151,000 in August, against expectations for a rise of 180,000. Richmond Federal Reserve Bank President Jeffrey Lacker said the U.S. economy appears strong enough to warrant significantly higher interest rates. gold XAU= jumped to a session high of $1,328.73 an ounce after the non-farm payrolls data, and was up 0.7 percent at $1,322.36 by 2:20 p.m. EDT (1820 GMT). It was on track to close the week up 0.15 percent.
U.S. gold futures GCcv1 settled up 0.7 percent at $1,326.70.
U.S. shares inched higher and European shares rallied after the data gave the Fed more leeway to stand pat on interest rates, while the dollar later turned higher and longer-dated Treasury yields edged up. MKTS/GLOB
"It remains to be seen whether gold can capitalize on the reprieve granted by today's rather ordinary payrolls," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar in which it is priced.
"The market was not expecting such a glum number from the U.S. ... it's evidence that the U.S. economy is still not strong enough to sustain another rate hike and that's positive for gold," said Jonathan Butler, commodities analyst at Mitsubishi.
"This number means rake hikes could get pushed further into the future and gold will benefit from safe-haven buying and expectations that the macro environment will continue to be favorable for even longer."
Many U.S. traders are expected to be away from their desks on Monday for the Labor Day holiday. slightly higher number would have almost guaranteed a rate hike later this month but now the guessing game will continue," Ole Hansen, Saxo Bank analyst, told the Reuters Global Gold Forum on Friday.
Silver XAG= was up 2.5 percent at $19.31 an ounce, a two-week high. Platinum XPT= rose 1.1 percent at $1,054.50 while palladium XPD= gained 1.4 percent at $672.70
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