Gold fell on Thursday as the dollar cut losses after U.S. data showed economic momentum was improving, but the downside was limited by signs the Federal Reserve was unlikely to raise interest rates in June.
The number of Americans filing new claims for unemployment benefits rose slightly more than expected last week, data on Thursday showed. But the four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 5,500 last week to 266,250. That was the lowest level since April 2000.
Spot gold was down 0.3 percent at $1,205 an ounce, while U.S. gold futures for June delivery were down 0.3 percent at $1,205 an ounce.
"We had a good run up and every rally is seen as an opportunity to take profits ... the market remains elastic, good buying on the dips and selling on the rallies, we have been doing this for the past 18 months," Ross Norman, CEO of broker Sharps Pixley, said.
Minutes of the Fed's April meeting, released on Wednesday, showed policymakers believed it would be premature to raise interest rates in June.
That view was widely held in the market following disappointing U.S. economic data over the past few weeks that weighed on the dollar, in turn helping gold hit a three-month high of $1,232.20 on May 14.
The minutes showed Fed officials pushing the prospect of a rate increase later into the year, further dampening appetite for the dollar, which fell 0.3 percent versus a basket of leading currencies.
Higher U.S. interest rates would increase the opportunity cost of holding non-yielding bullion.
Gold prices have struggled to break out of a $1,170-$1,230 an ounce range since mid-March, hamstrung by uncertainty over the timing of a U.S. rate rise.
However, investor sentiment has turned bearish in recent days as prices have fallen from the three-month highs reached earlier this week.
Outflows in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, continue to undermine investor sentiment. Holdings of the fund fell 0.41 percent to 715.26 tonnes on Wednesday, the lowest in four months.