TORONTO - Canada's main stock index followed overseas markets in making small moves ahead of a key U.S. jobs report that could determine if interest rates will be cut.

“The TSX like a lot of the markets is in a bit of a holding pattern,” said Allan Small, senior investment adviser at HollisWealth, pointing to U.S. markets being closed in observance of the July 4 holiday.

The S&P/TSX composite index closed up 12.65 points to 16,588.85.

“So on a day where there's really no news or no negative news, the markets seem to melt up,” he said in an interview.

Small said Friday's employment report will be crucial, with a weak number below a solid 165,000 increase in non-farm payrolls likely prompting markets to rise on anticipation the data will push the Federal Reserve to cut rates at its meeting later this month.

“Whereas if I see strong employment numbers that might call into question if the Fed goes within the next few weeks or holds on for a little longer,” he said.

Small said he believes the U.S. economy is strong enough despite an expected weak second-quarter earnings season for the central bank to hold off on any cuts.

“They can always cut later on. So I would hold off but the market is pricing in a cut at the next meeting.”

The energy sector led the 11 major sectors of the TSX as it gained 0.68 per cent even though crude prices dropped as U.S. stockpiles didn't fall as much as anticipated.

The August crude contract was down 54 cents at US$56.80 per barrel in afternoon trading and the August natural gas contract was down 1.9 cents at US$2.27 per mmBTU.

Kinder Morgan Canada Ltd., Husky Energy Inc. and Canadian Natural Resources gained on very low volumes because of the U.S. holiday.

Materials was up slightly led by Eldorado Gold, Kinross Gold Corp. and Barrick Gold Corp. even though gold prices fell after reaching a more than six-year high on Wednesday.

The August gold contract was down US$2.90 at US$1,418.00 an ounce and the September copper contract was down 0.40 of a cent at US$2.68 a pound.

“Look for the price of gold to possibly fall back in the coming days towards that $1,200 mark,” said Small.

The Canadian dollar traded for an average of 76.58 cents US, up from an average of 76.49 cents US on Wednesday.