Gold ended lower on Thursday, halting a four-session win-streak, as the dollar extended earlier gains after U.S. nonfarm payrolls rose more than expected in June, increasing bets that U.S. interest rates could rise earlier than expected.
Nonfarm payrolls increased by 288,000 jobs, while employment growth jumped in June and the unemployment rate declined to near a six-year low of 6.1 percent, the Labor Department said on Thursday.
Economists polled by Reuters had forecast a gain of 212,000 jobs in June, marking a fifth month above 200,000.
"Looking at the U.S. unemployment situation ...it is interesting that we are well into the territory now that one would expect a normalisation of monetary policy (accompanied to) an interest rates rise," Mitsubishi Corp analyst Jonathan Butler said.
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"The more hawkish members of the FOMC are probably going to use this as evidence that the U.S. can sustain higher interest rates," he added. "There is still downside risk there on gold but it is going to probably take the next FOMC meeting before that becomes clear."
Chart: Precious Metals
A low interest rates environment has been crucial in sending gold prices higher in the years after the 2008 credit crisis, as investors looked to put their money in non-interest-bearing assets.
for August delivery ended the session $10.30 lower at $1,320.60 an ounce, gaining 0.3 percent for the holiday-shortened work week.
Floor trading will be closed Friday for Independence Day.
Earlier, spot gold dropped as much as 1.3 percent to a one-week low of $1,309.64 an ounce and was down 0.6 percent at $1,319.
The metal was about 1.5 percent lower than a 3-month high of $1,332.10 hit earlier this week on geopolitical tensions in Iraq and Ukraine and was on course for its biggest daily loss since May 25.
The dollar hit a session high against the yen and the euro as the monthly European Central Bank news conference got under way.
—By Reuters with CNBC