Gold slid to its lowest in almost three weeks on Friday, with prices testing support at $400 per ounce as US jobs data lifted the dollar and dented bullion on heightened expectations of an interest rate hike.
Spot gold hit a low of $398.95, a level last seen on August 16, before recovering slightly to $400.75 by 1455 GMT, versus $405.80 quoted late on Thursday in New York.
Volatility was sharpened by thin conditions, with a short New York COMEX gold futures session ahead of the Labour Day holiday in the United States. Many London market participants were also heading to China for a conference next week.
US non-farm employers added 144,000 workers to their payrolls and hiring totals for the two prior months were revised up, the Labour Department reported, raising the possibility of a rise in US interest rates this month.
Gold market participants have been alert to all indications concerning US monetary policy as a rise in interest rates would tend to boost demand for the dollar, making gold more expensive for non-US investors.
"We could see the market go down again - if it breaks below $400 we could see $398, with firmer support around $395 and resistance at $405 now," one dealer said.
The euro dropped below $1.2100 against the dollar on the data.
Barclays Capital analyst Kamal Naqvi said that the market could well see another sell off next week as safe-haven purchases of the metal are unwound.
"There were without question some buyers of gold on the possibility of a terrorist incident occurring at the Republican convention," Naqvi said.
"That hasn't happened so some of those guys may liquidate after the long holiday weekend," he added.
Silver was fell almost 20 cents in line with falls on gold to $6.57/6.60, compared with $6.74/6.77 in New York.
Platinum eased back to $861.00/865.00, compared with $867.50/872.50 last quoted in the US market, while palladium was almost flat at $210.00/215.00 from $210/216 in the US market.
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