Gold steadied in late European trade on Friday after rising more than 1 percent, as the dollar gained after hitting record lows on weaker-than-expected U.S. payrolls data and oil prices softened.

Platinum and palladium pared losses after falling sharply on expectations that South African power problems might improve in the coming weeks, analysts said.

Gold rose as high as $988 an ounce after the data but fell to $976.00/976.80 at 10:23 a.m. EST, against $976.20/976.95 late in New York on Thursday, when it hit a record high of $991.90.

"Compared with what it has done before, gold has slightly underperformed in the last week. My guess is that we are going to see a few more days of sharp swings," said Stephen Briggs, economist at SG Corporate and Investment Banking.

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"There is a huge uncertainty in the market after these massive gains we have seen this year. People are getting a bit nervous of the logic of such high prices in an environment of the U.S. remorselessly heading into a recession."

Gold has gained nearly 20 percent in 2008 as funds, speculators and investors buy the precious metal on expectations of further interest rate cuts in the United States and record-high oil, which elevates its safe-haven appeal.

The euro turned lower versus the dollar after hitting record highs, as investors booked profits on gains made following a drop in U.S. non-farm payrolls for a second straight month.

A firmer dollar makes gold costlier for holders of other currencies and often lowers bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

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