Gold settled under $1,325 on Thursday, as the dollar held firm after weekly jobless claims data showed an improving U.S. labor market, which could support a wind-down of the Federal Reserve's bond buying later this year.
U.S. jobless claims fell to a near six-year low last week, official data showed on Thursday. The reading gives a clearer view of the labor market's health after an update in government computer systems in California and Nevada threw claims data into disarray earlier this month.
Spot gold, steady above $1,330 before the release of the U.S. data, fell 0.7 percent to $1,323 an ounce, after gaining nearly 1 percent in the previous session. for December delivery closed $12.10 lower at $1,324.10 an ounce.
A stronger dollar makes gold and other commodities priced in the U.S. currency more expensive for buyers in other countries.
Concerns about a possible U.S. federal debt default and government shutdown next week as the U.S. Congress is struggling to pass a spending bill to keep the government funded beyond Oct. 1, has spurred some demand for the metal as a safe haven in recent sessions.
"Gold would thrive from uncertainty about the U.S. debt ceiling talks and the Fed tapering," Societe Generale analyst Robin Bhar said.
"But data showing an improving U.S. labor market earlier today may be the reason for some profit-taking, and if the U.S. numbers continue to improve we could still expect the tapering in December."
Bullion gained more than 4 percent last week after U.S. Federal Reserve Chairman Ben Bernanke refused to commit to starting a reduction in quantitative easing this year, defying expectations for a $10 billion cut to the $85 billion monthly bond-buying stimulus.
For more information on precious metals, please click here.