Gold ended higher on Friday but failed to retain stronger gains made after softer-than-expected U.S. monthly payrolls data as investors focused on a drop in the U.S. unemployment rate to its lowest since 2008, which lifted stock markets.
Data showed U.S. employers hired far fewer workers than expected last month—nonfarm payrolls rose by 113,000, well below the consensus of 185,000—although the unemployment rate hit a five-year low of 6.6 percent.
"The nonfarm payrolls came in weak, though it was still a slight improvement from December. But the unemployment rate dropped just above that 6.5 percent the Fed is looking for," VTB Capital analyst Andrey Kryuchenkov said.
"Now, the Fed are not going to change their forward guidance ... because they realize that inflation pressures are not there yet," he added. "However, from an investor point of view, this still suggests a strong dollar going forward."
(Read more: Not only weather to blame for 'weird' jobs report)
Spot gold rose as much as 1.2 percent to a session high of $1,271.70 an ounce after the jobs release before paring most of its gains.
It was last up 0.6 percent at $1,265 an ounce, while U.S. gold futures for April delivery settled $5.70 higher at $1,262.90 an ounce.
"Gold tried a lot of times in January to break above $1,270 and has never had a sustained close above that level. I think the longer we stay below $1,270, the more chances we have to tumble significantly," Kryuchenkov said.