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Gold prices rose after mixed U.S. jobs data on Thursday, as the dollar tumbled on expectations of the Federal Reserve skipping an interest rate hike at its next policy meeting.

Spot gold rose 0.5% to $1,972.39 per ounce by 9:37 a.m. EDT (1337 GMT). It fell 1.4% in May. U.S. gold futures gained 0.4% to $1,972.40.

U.S. private payrolls increased by 278,000 in May, beating expectations for a rise of 170,000, but separate data showed the number of new U.S. jobless claims rose modestly last week.

"The initial reaction was the market selling off ... and then you have another number 15 minutes later showing that jobless claims came out in line," said Daniel Pavilonis, senior market strategist at RJO Futures.

The dollar drifted lower from a two-month high, making bullion cheaper for holders of other currencies, as investors trimmed bets that the Fed will raise interest rates this month. [USD/]

Markets now see a 70% chance the Fed will keep rates unchanged next month, up sharply from a 30% probability earlier, after Fed officials including the vice chair-designate pointed towards a rate hike "skip" in June.

Gold, which does not yield any interest of its own, tends to lose its appeal when interest rates rise.

"There's some kind of safe-haven demand supporting gold because of uncertainty regarding the debt ceiling bill," said Commerzbank analyst Carsten Fritsch.

The U.S. Senate was set to take up the bill with just four days left to pass the measure and send it to Democratic President Joe Biden to sign, averting a catastrophic default.

Spot silver rose 0.6% to $23.60 per ounce, while palladium was nearly 2% higher at $1,388.91.

Platinum gained 1.3% to $1,005.85 after hitting a seven-week low.