Gold closed at its lowest in nearly five weeks on Thursday after robust economic data fueled speculation that a U.S. rate rise may come sooner rather than later, though strength in the euro limited losses.
Traders are now focusing their attention on Friday's U.S. non-farm payrolls data, a key barometer of the world's largest economy, for clues as to the next direction for gold.
U.S. gold futures for August delivery settled down $9.70, or 0.8 percent, at $1,175.20 an ounce—the lowest close since May 1. Meanwhile, was down 0.8 percent at $1,175 an ounce.
Gold failed to benefit much from waning appetite for risk in the wider markets. A persistent sell-off in bond markets knocked financial market confidence, with stocks lower globally and not even traditional safe havens such as the Swiss franc providing much refuge.
"If this unraveling of core positions continues I think gold will find support, but obviously at this stage it is worrying that the dollar weakness has failed to attract buyers," Saxo Bank's head of commodity research Ole Hansen said.
"Exchange-traded product holdings are back to 2009 levels and Chinese investors are busy placing bets on their stock markets instead of gold."
Gold is down nearly 2 percent this year in anticipation of the first U.S. interest rate rise in nearly a decade. Rising interest rates lift the opportunity cost of holding non-yielding bullion, while also boosting the dollar in which gold is priced.
The U.S. Federal Reserve has indicated that the timing of any rate rise is dependent on economic data. A report on Thursday showed the number of Americans filing new claims for unemployment benefits fell slightly more than expected last week.
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"A lot of (gold's weakness) is pricing in expectations for a fairly positive non-farm payrolls reading tomorrow. All things being equal, it should have been another pretty solid month of gains," Mitsubishi analyst Jonathan Butler said.
Demand for physical gold in the main Asian markets was lackluster, with a tight price range and expectations of more declines in a seasonally quiet period for bullion keeping consumers away from gold jewelry, bars and coins.