Gold turned lower on Thursday, dropping for the fourth straight session on pressure from the firm U.S. dollar ahead of Friday's U.S. payrolls report, which will give clues about whether the Federal Reserve will soon raise interest rates.
"It's mostly related to the dollar," said Rob Haworth, senior investment strategist for U.S. Bank Wealth Management in Seattle.
"You're waiting for tomorrow's employment report. It's a big one because it will really set the tone for future Fed meetings."
The U.S. dollar rose against a basket of major currencies as traders closed out profitable bets against it ahead of the payrolls data, while U.S. and European stock markets also rose.
"Tomorrow's NFP remains the focal point," Macquarie analyst Matthew Turner said, referring to U.S. non-farm payrolls data due on Friday.
"Strong employment growth in the U.S. is what is keeping alive the dollar's bull case and any signs it is flagging, without any benign explanation such as a tighter labor market, would be very bullish gold."
Earlier, gold prices pared gains after a larger than expected rise in weekly jobless claims in the United States.
The number of people filing for unemployment benefits rose 17,000 to a seasonally adjusted 274,000 last week, the biggest gain in more than a year, the Labor Department said.
Gold prices have fallen since reaching a 15-month high of $1,303.60 on Monday when the dollar slumped against the yen after the Bank of Japan stood pat on policy - before the U.S. currency recovered.
The precious metal is up 20 percent this year so far as expectations the Fed would push ahead with interest rate increases faded.
Gold is sensitive to interest rates and returns on other assets.
Investor interest in gold remains robust. Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.07 percent to 825.54 tonnes on Wednesday, their highest in more than two years.
Among other precious metals, silver futures turned up 0.5 percent to $17.39 an ounce, below Monday's 15-month high at $18.
Soaring silver prices in 2016 mean bargain-hunting coin buyers have stepped to the sidelines while futures participants take the reins, a Silver Institute survey showed.