Gold fell to a two-week low on Friday, on track for its worst week in a month as the dollar and U.S. yields strengthened on expectations that an upbeat jobs report could prompt the Federal Reserve to withdraw stimulus soon.
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Strong U.S. jobless benefits and factory data led to losses of around 3.5 percent over the past five sessions, which pushed gold below the technical resistance level of $1,300 an ounce.
Spot gold fell as much as 1.9 percent to $1,283.29 an ounce earlier in the session and was trading down 1.5 percent at $1,287.10 by 0951 GMT. U.S. gold futures for December delivery declined $24.70 to $1,286.50 an ounce.
Stirred by optimism over the U.S. economy, the dollar held firmly above a six-week low hit on Wednesday, European shares set a new two-month high and benchmark U.S. Treasury yields edged close to two-year highs above 2.7 percent.
As gold pays no interest, the rise in returns from U.S. bonds is seen as negative for the metal.
"If we get a surprise stronger number (from nonfarm payrolls) than the market currently expects, it will increase appetite for the dollar, selling pressure on bonds and buying of stocks and of course the combination of the three is really anti-gold," Saxo Bank senior manager Ole Hansen said.
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"Obviously, a strong number would enhance the view of Fed tapering in September," he added.
The Fed has said its policy remains driven by data, but it offered no fresh hints in a statement on Wednesday that it was preparing to reduce its monetary stimulus at its next policy meeting in September.
Market players, therefore, are looking to U.S. data for clues on when such tapering might start.
Nonfarm payrolls at 1230 GMT are expected to show a solid rise in July. A Reuters survey pointed to a monthly increase of 184,000 with the jobless rate seen dropping to 7.5 percent, the lowest level in more than four years.
SPDR HOLDINGS FALL
As a gauge of investor interest, holdings in SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.7 percent to 921.05 tonnes on Thursday, hitting fresh four-year lows.
Outflows from the top eight gold ETFs tracked by Reuters have totalled 19 million ounces so far this year, or about $25 billion at current prices.
Physical demand has held up reasonably well despite the volatility in prices, traders said.
Premiums over London spot prices, one of the best measures of physical demand, were about $22 an ounce in China, which is set to overtake India as the top gold consumer this year.
Sales of gold bars and coins at the Perth Mint picked up in July from the previous month, as the metal logged its biggest monthly price gain since January 2012.
Silver fell 1.6 percent to $19.26 an ounce, closely tracking gold's fluctuations.
Platinum was down 1.4 percent at $1,416.99 an ounce and palladium lost 0.8 percent to $725.47 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by Dale Hudson)