Gold prices rose on Thursday, supported by weak employment data, falling oil prices, and remarks by the Federal Reserve Chair indicating diminishing inflation risks, ahead of the release of U.S. nonfarm payrolls data.

Spot gold rose 0.9% to $4,064.41 per ounce by 11:01 GMT, after hitting its highest since June 23 in the previous session. The metal had ended a two-day losing streak to close higher at $4,029.89 on Wednesday following the release of U.S. nonfarm payrolls data for June. Meanwhile, U.S. gold futures for August delivery edged down 0.1% to $4,076.60 per ounce.

Nikos Tzabouras, senior market analyst at Nerdot.com, a unit of Jefferies, said: "The precious metal is seeing a rebound today after Fed Chair Kevin Warsh softened his hawkish tone at the European Central Bank forum."

Warsh stated on Wednesday that inflation expectations and risks had receded in recent weeks, while reaffirming the Fed's commitment to bringing inflation back to its 2% target, warning against expectations of easier monetary policy.

Traders see about a 62% probability of an interest rate hike by September. Higher interest rates increase the opportunity cost of holding non-yielding assets like gold. Theoretically, rate hikes can curb inflation, albeit at the expense of negatively impacting the labor market and overall economic growth.

Those hawkish expectations retreated slightly this week, especially after a separate report - less comprehensive than nonfarm payrolls - showed private sector payrolls rose less than expected in June. Additionally, new Fed Chair Kevin Warsh indicated on Wednesday that inflation risks in the U.S. had decreased, fueling speculation that the Fed might opt not to raise interest rates as early as this month.

The World Gold Council announced that central banks returned to buying gold in May, and based on the latest reported data, official gold reserves increased by a net 41 tonnes during the month.

Investors are now awaiting the June nonfarm payrolls data, due today, for further clues on the Fed's interest rate path. The U.S. economy is expected to have added 114,000 jobs in June, down from 172,000 in May, but still hovering around strong levels. Meanwhile, the unemployment rate is expected to remain at 4.3%, where it has held steady since March.

Over the past three months, all highly anticipated nonfarm payrolls reports have beaten expectations, pushing the three-month average of jobs to a two-year high of 188,000.

Analysts at Morgan Stanley said in a note: "Our forecasts point to a strong labor market, confirming the recovery from last year's recession." Signs of continued labor market resilience could give the Fed more room to raise interest rates this year, especially as policymakers express concerns about inflation driven by rising energy prices.

Oil prices fell after the signing of the framework peace agreement between the U.S. and Iran last month, but uncertainty remains over whether the sharp rise in crude oil prices following the joint U.S.-Israeli attack on Iran in late February will contribute to sustained inflationary pressures.

Tzabouras said any notable weakness in the data could help gold approach $4,250, but would not be enough to pull it out of the downturn. He added: "Anything above 100,000 jobs would likely be enough to support the Fed's rate hike expectations, leaving gold vulnerable to further declines toward $3,500."

In other precious metals markets, spot silver rose 0.9% to $59.69 per ounce, platinum gained 1.8% to $1,605.51, and palladium rose 2.3% to $1,238.32.

Meanwhile, the U.S. dollar index edged slightly lower, but the likelihood of the Fed adopting a tighter monetary policy kept the currency hovering above pre-conflict levels. A stronger dollar can signal lower gold prices, as it makes the metal more expensive for foreign buyers.

Neil Welsh, head of metals at Britannia Global Markets, said in a note: "The currency stability is prompting investors to reassess their positions after a few weeks of volatility."