Gold prices rose to their highest level in more than a week Friday after data showed the U.S. created slightly fewer jobs than expected in March.

The data pointed to moderate improvement in the labor market, suggesting the Federal Reserve is likely to keep interest rates near zero well into 2015.

Gold for June delivery, the most active contract, rose $18.90, or 1.5%, to close at $1303.50 a troy ounce on the Comex division of the New York Mercantile Exchange. It was the highest close since March 25.

The Labor Department said that U.S. payrolls rose by 192,000 in March, below forecasts for a 200,000 gain. The nation's unemployment rate held steady at 6.7%. January and February payrolls were revised higher.

"Gold has been extremely oversold on the idea that we are looking at higher interest rates, and today's figure stymies the idea that rates have to go higher soon after the Fed is finished cutting its stimulus," said James Cordier, a principal at Liberty Trading Group.

Gold prices have dropped around 7% since March 14, as some investors became more optimistic about the U.S. economic outlook, while others grew wary of holding zero-yielding assets after the Federal Reserve signaled that it may raise benchmark interest rates around six months after it ends its bond-purchasing program.

The Fed has cut its monthly bond purchases to $55 billion since January, and is on track to unwind the stimulus completely by the fall of 2014. The Fed's stimulus—which has kept the dollar cheap and rates low—has helped boost gold over the last several years, as the precious metal is traditionally viewed as a hedge against currency debasement and inflation.

Gold prices have also weakened on easing tensions in Eastern Europe, as Russia's annexation of Crimea drew little response by the West beyond condemnation and a series of narrowly-targeted sanctions. Investors traditionally buy gold in times of geopolitical uncertainty, expecting the metal to hold its value while other assets fall.

Some market watchers believe the rally in gold is unlikely to last, as Friday's jobs numbers, while slightly below forecasts, don't appear to be weak enough to derail the Fed's plans to keep reducing bond purchases.

"The data was good for a bounce, but it doesn't change anything fundamentally," said Bob Haberkorn, a broker at RJO Futures. "For gold, it is still a sideways dance at this point."

The Wall Street Journal