Gold fell on Thursday after the European Central Bank and the Bank of England did not hint at more economic stimulus, and as encouraging U.S. jobless claims data fuelled optimism about the upcoming nonfarm payrolls report.
The metal's 0.5 percent decline snapped a two-day winning streak, marking its biggest daily decline in a week. Bullion dropped after the ECB gave no clear hints of further monetary easing and the BOE decided not to restart its gilt purchases plan.
The gold market now turns its focus to Friday's all-important U.S. nonfarm payrolls report for February. Signs of continuing recovery in the U.S. labor market could prompt the Federal Reserve to halt its economic stimulus earlier than thought.
"Gold is under pressure as the overall numbers have started to pick up in the economy. If we see job growth on Friday, the metal may continue to weaken," said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.
Spot gold was down 0.5 percent at $1,575.44 an ounce. U.S. gold futures settled up 20 cents at $1,575.10, with trading volume about 10 percent below average, preliminary Reuters data showed.
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Gold's safe-haven status was also dented after the U.S. House of Representatives passed a bill to avert a possible government shutdown for now.
Strong U.S. data earlier this week, including a better-than-expected private-sector jobs report, has brightened the mood in the markets and lifted the Dow Jones industrial average to record highs for a third consecutive session on Thursday.
"Every time we've seen a strong number in recent weeks, it's almost as if someone's been pressing the sell button (on gold) automatically,'' said Ole Hansen, senior manager at Saxo Bank.
U.S. job growth likely was moderate in February as higher taxes and fears of deep government spending cuts made employers cautious, suggesting there was still not enough momentum in the economy for the Fed to scale back its stimulus.
Silver dropped 0.9 percent to $28.76 an ounce.
SPDR Gold Stems Outflow
Underpinning gold prices were hopes that recent sharp outflows from gold-backed exchange-traded funds appeared to have bottomed out.
Holdings of SPDR Gold Trust, the world's largest gold ETF, stood unchanged on Wednesday after 11 straight sessions of losses.
Investors pulled $5.6 billion from gold exchange-traded products (ETPs) in February after a poor performance by the yellow metal, but appetite for riskier, growth-oriented industrial metals ETPs remained intact.
In the physical market, buyers in China slowed their robust purchases of gold as purchases made in previous weeks started to arrive, easing a supply shortage.
China's domestic gold prices had been trading at premiums of over $20 above international prices in the past few days, but that spread shrank to just over $10 on Thursday, and traders said the premiums could fall further.
In platinum group metals, spot platinum was up 0.3 percent at $1,589.74 an ounce and spot palladium climbed 1.5 percent to $755.47.