Spot gold prices in Hong Kong opened sharply higher on Monday at$741.50-742.00/oz, compared with Friday's close of $734.40-734.90/oz,  supported by prolonged weakness in the US dollar, according to local traders.

     Traders said the US dollar remained weak against the euro despite better than expected US payrolls data as the market believed that the strong US jobs report released on Friday was not enough to keep the Federal Reserve from cutting interest rates further. 

     The US economy added 110,000 jobs in September, more than the 100,000 that most analysts were expecting. The government also revised its August job reading to show a gain in non-farm payrolls compared with an initial estimate that job growth had declined.

     "Gold prices in Hong Kong are higher this morning, following the stronger US close on Friday at around $741/oz," one Hong Kong-based trader said. "The US dollar remains weak, pressured by the increase in the unemployment number in the US," he added. 

     "Trade in Asia, however, has been quiet as the Japan market is closed for a national holiday," the trader said, adding that gold prices were now capped at $745/oz. "If the US dollar continues to decline, we may see gold prices increase further, heading towards $750/oz or even higher ... the overall market sentiment on gold is still positive," he noted. 

     Another trader said the market will continue watching the US dollar for direction of gold prices. "Gold prices are now seeing strong support at above $735/oz as quite a number of fund players are still long on the metal," he said.