Gold eased off a one-week peak on Thursday as robust U.S. economic data outweighed the European Central Bank's decision to hew to an accommodative monetary policy, with investor focus on next week's Federal Reserve meeting.
Earlier, prices rose as much as 0.5% to $1,433.46, a one-week high, after the ECB left benchmark rates unchanged, with the bank's chief sounding the need for a "significant degree of monetary stimulus" down the road.
"Gold sold off on good news out of the U.S. with the fact that we are going into the Fed meeting next week," said Bob Haberkorn, senior market strategist at RJO Futures.
Weekly U.S. jobless claims number fell to a three-month low last week, pointing to strength in the labor market, while new orders for key U.S. made capital goods surged 1.9 % in June.
"However, these two numbers will pass by as the day goes on and traders will be back to being focused on the Fed next week. People want to be long heading into the meeting," Haberkorn said.
Market participants are now looking ahead to the U.S. central bank's July 30-31 monetary policy meeting where it is expected to trim its interest rate by at least 25 basis points.
"The current global economic headwinds and a dovish tilt by central banks globally is one of the most bullish environments for gold," analysts from Bank of America Merrill Lynch said in a note.
"If the U.S. central bank disappoints on rate cuts, gold could decline quickly, with volatility potentially exacerbated by elevated long positions."
Among other precious metals, spot palladium edged up 0.1% to $1,541.09 per ounce, while platinum slid 0.5% to $871.22, after touching its highest in nearly three months earlier in the session.
Gains in platinum was due to bargain hunting as it is cheaper than gold by about $550, with traders taking the opportunity to narrow the wide spread between the two, RJO's Haberkorn added.
Silver slid 0.6% to $16.50 per ounce. It has gained about 16% since a near six-month low of $14.25 hit in late May.
"The key element that has been fueling the recent rally in silver was the stretched levels of the gold-silver ratio which suggested to many traders that silver was cheap relative to gold," Julius Baer analyst Carsten Menke said, adding that profit-taking was now occurring.