Gold firmed on Thursday on a weaker dollar in the run-up to U.S. non-farm payrolls data, as traders hoped for signs of a weaker labor market to boost chances of a rate cut by the Federal Reserve as early as March.
Spot gold edged up 0.2% to $2,029.92 per ounce. U.S. gold futures settled 0.1% lower at $2,046.40.
"The markets have gotten in front of themselves on the interest rate expectations," said Chris Gaffney, president of world markets at EverBank, adding that the only risk to metals prices next year was if "the Fed has to keep rates higher for longer."
On Monday, bullion scaled an all-time peak of $2,135.40 on elevated bets for a Fed cut, before dropping more than $100 on uncertainty over the cut's timing.
Traders were pricing a 62% chance of a rate cut by March next year, CME's FedWatch Tool showed, but a Reuters poll saw rates unchanged until at least July.
Lower interest rates tend to support non-interest-bearing bullion.
Benchmark 10-year Treasury yields were near three-month lows, while the U.S. dollar dipped 0.6%, making gold cheaper for other currency holders.
While "drivers for a further gold rally are set in place," gold should consolidate and spend some time testing these new price levels, said Everett Millman, chief market analyst at Gainesville Coins.
After an uptick in weekly U.S. jobless claims, traders positioned for the non-farm payrolls data on Friday in search of more signs of a weaker labor market.
The market consensus is for a soft landing in the U.S., which historically makes gold less attractive. Still, geopolitical tensions in a critical election year alongside central bank buying could support gold in 2024, the World Gold Council said.
Spot silver fell 0.4% to $23.79 per ounce, platinum rose 2.1% to $908.74, and palladium climbed 2.8% to $969.94.