Gold fell on Thursday afternoon in Europe after the latest US jobless claims data bolstered expectations of strong numbers in a key employment report on Friday and underlined expectations of an interest rate rise later this summer, dealers said.
The US Labour Department said jobless claims fell to 315,000 from 340,000 the week before - a sign that the jobs market is falling into step with the recovering economy.
The dollar rose broadly on the jobless data, dulling the appeal of dollar denominated bullion for foreign investors.
Spot gold fell back to close at $387.65/388.35 by 1515 GMT, versus $393.35/394.05 last quoted in New York on Wednesday.
The euro was last quoted at $1.2075 against the dollar, down from $1.2132 in late morning trade.
Bullion players said the market would now be turning its attention to Friday's US April employment data, which could give hints on when the Federal Reserve will raise rates from a 46-year low.
Higher rates tend to boost the yields of US assets, increasing demand for the dollar. A stronger US currency makes dollar-priced gold less attractive for non-US investors.
"Gold is looking relatively weak after the US data came out better than expected," one dealer said, adding that the market could be open to further drops to around $385.00 ahead of Friday's data.
Gold is now down around nine percent from a 15-year peak of $430.50 an ounce touched in January, on fund liquidation and a recovery in the US dollar.
Bullion hit its lowest level since November 7 last week at $377.50 an ounce, on concerns that credit controls in China could curb the country's demand for raw materials.
In other metals, platinum stood at $795.00/800.00, from $809.00/814.00 in New York. Palladium was at $251.00/256.00 from $248.00/253.00.
Dealers said platinum and palladium were seeing keen physical interest at the lower levels and should gain modestly.
GFMS Limited said a sharp rise in platinum prices severely squeezed Chinese jewellery fabricators' profit margins in 2003, leading them to look at other white metals to meet demand.
But in stark contrast to other analysts, it said the palladium market was in "fundamental deficit," suggesting that auto-makers were perhaps near to exhausting their stocks.
Silver was quoted at $5.89/5.93, compared with $6.11/6.15 in New York as the market gave back earlier gains in sympathy with gold's drop.