Gold prices pared gains on Thursday after hitting three-week highs earlier in the session as a set of better than expected U.S data lifted the dollar, while palladium notched a record peak on supply concerns.
Spot gold slipped 0.29 percent to $1,308.46 per ounce, having earlier hit $1,320.22, its highest since Feb. 28. The metal was set to snap five consecutive sessions of gains.
U.S. gold futures settled $5.60 higher at $1307.30.
The number of Americans filing applications for unemployment benefits fell more than expected last week, and other data showed a measure of factory activity in the mid-Atlantic region rebounding sharply this month after heavy falls.
"The data was decent today with Philly Fed noticeably more robust and positive jobs data for the payrolls survey week," said Tai Wong, head of base and precious metals derivatives trading at BMO, adding that caused a momentary dip in gold prices.
"Gold's failure to extend gains above $1,320 has triggered some liquidation from long options positions and also fueled algorithms sensing short term weakness."
Against a basket of currencies, the dollar index rose to 96.32, up 0.6 percent on the day, making dollar-denominated gold more expensive for investors of other currencies.
"Overall trend in gold is higher, they (Fed) scaled down interest rates and thats been helping," said Bill O'Neill, partner at Logic Advisors said, adding that bullion would likely work its way up to $1,350 an ounce.
The U.S. central bank on Wednesday stunned markets by abandoning all plans to raise rates this year, a signal its three-year campaign to normalize policy might be at an end.
Higher interest rates raise the opportunity costs of holding gold, which earns nothing and costs money to store and insure.
Palladium touched an all-time high of $1,620.50 an ounce in the session, and was currently up .13 percent at $1,605.56
Analysts attribute this to concerns of a supply crunch in the autocatalyst metal. A possible temporary export ban on precious metal scrap from Russia and hopes of economic stimulus from China has also helped lift prices.
"There is a big deficit of palladium production this year. Until auto-companies switch over to platinum, palladium prices are going to be pretty strong," Logic Advisors' O'Neill said.