Gold fell to a three-week low on Thursday, losing nearly 2 percent as lower US jobless claims and a stalled euro rally prompted bullion investors to lock in recent profits. Bullion was set for its first weekly decline in 12 weeks, after the US jobs report lifted the dollar and further eroded investor demand for bullion, although several analysts said they viewed this as short-lived.
"The jobless claims drop is behind the decline, but gold's weakness is likely to be temporary. It's more as a reason to take profits than anything else," said James Steel, chief commodity analyst at HSBC. Despite the better jobs data, economists said it is not enough to suggest much improvement in the distressed labour market, hardening the view of more US monetary policy easing next month, which benefits gold.
Gold is also on track course for a 3.4 percent fall this week, which would mark its largest weekly drop since early July, while holdings of gold in the world's largest exchange-traded fund, the SPDR Gold Trust, fell for a fourth consecutive session, indicating lower investment appetite.
Spot gold dropped 1.6 percent to $1,322.25 by 12:48 pm EDT (1648 GMT). US gold futures for December delivery trade down $20.8 an ounce at $1,323.40. Earlier in the session, gold rose toward $1,350 an ounce, but sentiment turned bearish after the metal failed to gain further even as the euro surged above $1.40 before retreating, traders said.
"We are in a consolidation phase. Euro was positive and gold never caught the bid and could not make a new high," said Jonathan Jossen, COMEX gold options floor trader.
The dollar reversed losses to trade higher against the euro in choppy trade as investors wrestled with uncertainty over the size and shape of expected US monetary easing. Reflecting the lower appetite among investors for gold, SPDR said its holdings eased to 1,299.177 tonnes by October 20 from 1,300.089 tonnes on October 19. The holdings hit a record at 1,320.436 tonnes on June 29.
Gold also shed nearly 3 percent on Tuesday in its largest one-day fall since July following China's surprise announcement of an interest rate rise. Silver fell 3.1 percent to $23.16 an ounce. Platinum prices last traded down 0.7 percent at $1,667.49, while palladium edged up 0.4 percent at $586.99 an ounce.
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