By Alan Fein

(AXcess News) New York - Gold and silver prices extend their losses for the second day in a row Friday with precious metals set to end the week's session at a loss despite the unexpected drop in US payrolls in January.

Gold futures were down 11.60, or more than 1.09%, at $1,051.40 in New York by 12:14pm ET Friday.

Silver futures plummeted to their lowest level since August, 2009, down 55 cents, or nearly 3.52%, at $14.81. 

Exasperating precious metals traders were uncertainty towards European soverign debt, especially Greece, Portugal and Spain, though the EU's Central Bank Chief, Jean-Claude Trichet, is confident while the rest of the market didn't share in that outlook Thursday when the global selloff of gold and silver began.   Friday that outlook appeared to continue despite the unexpected US Department of Labor January payroll report that showed a drop in layoffs.  But it was the dollar's run-on rally that appears to be keeping gold and silver prices depressed.  Mineral Economist Dr. John Whitney told AXcess News in a telephone interview Friday that the market is probably over-reacting.

"This is just a knee-jerk reaction," said Dr. Whitney.  "Prices should stabilize."

StandardBank precious metals analyst Leon Westgate essentially agreed with Dr. Whitney, though he cautioned that a wide gap exists in technical trading support below $1,050 for gold.

"Below this $1,050 level there is big gap before technical support re-emerges around the $1,022 level," said Westgate. "Gold remains at the mercy of the dollar."

The greenback continued to take the sheen off of precious metals in New York with European and Asian markets now closed, though gold futures hadn't cracked the $1,050 per ounce level Westgate says would trigger technical trading and push gold lower, dragging silver prices down alongside.

The euro was trading at 1.3613 to the dollar, down 0.0115.  The pound fell 0.0147 against the dollar to 1.5620.