Gold fell on Friday, heading for a third straight weekly drop, as the dollar was buoyed by a decline in U.S. jobless claims that reinforced the chance of a faster-than-expected tightening in U.S. monetary policy.
Prices had fallen to their lowest since early January at $1,216.01 on Thursday, under pressure from the Federal Reserve's indication that it could raise borrowing costs more rapidly than expected when it starts moving.
Any increase in interest rates would hurt investment in non-interest-bearing assets such as bullion.
Spot gold was down 0.2 percent at $1,222.64 an ounce by 1153 GMT, on track for a 0.5 percent drop for the week. U.S. gold futures slid 0.3 percent to $1,223.50.
"Gold is suffering from a stronger dollar after the Fed's increase in rate projections earlier this week and also higher equities after the Scotland vote," MKS SA head of trading Afshin Nabavi said.
The dollar rose 0.3 percent against a basket of leading currencies after Thursday data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting a sharp slowdown in job growth in August was an aberration.
"This week's FOMC meeting maintains our belief that the process of U.S. monetary tightening continues and this will encourage further advances in long-term real yields and the U.S. dollar," Deutsche Bank said in a note.
"We therefore expect headwinds for gold prices will be sustained into next year."
European shares rose as the uncertainty over the United Kingdom's fate ended on Friday as Scotland spurned independence in a historic referendum that had threatened to sow financial turmoil and diminish Britain's remaining global clout.
Physical demand in Asia has picked up slightly with the lower prices, providing some support. Premiums in top buyer China held steady at $5-$6 an ounce, compared with about $4 earlier in the week.
"Physical demand is starting to pick up with lower prices but it's not aggressive yet. We may have a bit more room on the downside towards $1,200/$1,180 and that should see buying increase," MKS Nabavi said.
In the newly launched international bourse of the Shanghai Gold Exchange, the most traded contract rose nearly 6 percent.
Among other precious metals, silver was also headed for a weekly decline. The metal was down 0.3 percent at $18.41 an ounce, having touched its lowest since June 2013 in the previous session.
Platinum was up 0.1 percent at $1,342.74 an ounce and palladium fell 0.6 percent to $822.43 an ounce.