"Anything that is good for the economy in the United States will lead to higher interest rates at some time in the future, and that's bad for gold -- and the other way around."
Data on Thursday showed the U.S. labor market was firming.
The U.S. dollar rose against a currency basket, while major U.S. stock indexes climbed to all-time intraday records.
"Market attention has centered on the 573.6-ton increase in gold exchange traded product (ETP) holdings this year, representing a 39.2 percent increase year-to-date," said RBC Capital Markets in a note.
"While current levels are largely justified, we think any eventual unwind will be equally as impressive as the year-to-date uptick."
Palladium fell by as much as 5 percent to $686.50 an ounce after hitting a 14-month high on Wednesday at $746.10 an ounce. It had rallied sharply in thin Asian trading hours on Wednesday, apparently as investors holding short positions rushed to cover.
"A... pullback is in order after some over-exuberance," said ETF Securities' commodity strategist Martin Arnold.
Silver was down 0.37 percent at $19.99 an ounce, while platinum was 2.69 percent lower at $1,140.50 an ounce.