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Gold extended its rally, jumping more than 1% to its best week since November last year after an unexpected drop in U.S. jobs growth in April hastened a retreat in the dollar and U.S. Treasury yields.

U.S. nonfarm payrolls rose by only 266,000 jobs last month, falling short of expectations, with employers likely frustrated by labor shortages as the economy reopens.

Spot gold jumped 1.2% to $1,837.54 per ounce by 9:58 a.m. EDT (1358 GMT), after jumping as much as 1.5% to its highest since Feb. 11, at $1,842.91. Up 3.8% so far, gold is on course for its best week since early November 2020.

U.S. gold futures rose 1.3% to $1,838.80.

With the "complete miss on the (jobs) number," the yields are going to compress for the moment and the dollar index also broke below support levels, allowing gold to shoot up, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

But gold's rally may be short lived since next month's jobs data could show a "blow out" number, causing yields to start accelerating, Streible added.

The dollar index extended declines post the data, while benchmark U.S. Treasury yields also retreated, translating into lower opportunity cost of holding the non-interest bearing bullion.

"Gold's short-term momentum could make a run towards the $1,857 level, which could be followed by a move towards the $1,925 resistance level," Edward Moya, senior market analyst at OANDA said in a note. 

But waning physical demand in India remained a potential headwind, with the second biggest bullion consumer reeling from a worsening pandemic.

Elsewhere, palladium fell 2.2% to $2,882.69, after hitting an all-time high of $3,017.18 earlier this week.

Silver rose 0.5 % to $27.43 per ounce, on course for an about 6% gain this week. Platinum rose 0.1% to $1,253.75.