Gold fell up to 2 percent on Friday as global shares and the dollar rose after monthly US non-farm payrolls data showed the United States job market remained on a strong footing. Nonfarm payrolls increased 257,000 last month, topping expectations for 234,000 jobs, and data for November and December was revised higher. The unemployment rate ticked up to 5.7 percent as a result of an increased labour force.
"The US employment report was good and there has been quite a sharp adjustment in interest rates expectations, with 10-year Treasury yields up 10 basis points," ABN Amro analyst Georgette Boele said. "I expect lower precious metals prices for the next six months up to the moment the US really starts hiking interest rates."
Spot gold dropped to a three-week low of $1,237.39 an ounce in earlier trade and was down 1.9 percent to $1,240.15 an ounce by 1508 GMT. The metal has lost 3.2 percent so far this week, which would be its largest fall since the week ending October 31. It gained 8.4 percent in January, its biggest monthly rise in three years, lifted by global economic concerns and political uncertainty in the euro zone.
US gold for April delivery dipped 1.6 percent to $1,241.30 an ounce. The dollar rose 0.9 percent against a basket of leading currencies, helped by a rise in the benchmark 10-year US Treasury yield to 1.9 percent. European shares pared earlier losses and Wall Street opened higher after the US data. The gold market was also keeping an eye on China's move this week to cut the reserve requirement for banks in an effort to fight off an economic slowdown and Greece, where increased uncertainty has supported prices.
"The negative pulls for gold are the elevated speculative positions, hawkish Fed and stronger dollar, while the lowering of the reserve requirements in China, negative yields in most European countries and uncertainty in Greece lend support," Saxo Bank senior manager Ole Hansen said. Elsewhere, holdings at SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose on Thursday to 24.86 million ounces, the highest since September.
China's gold consumption fell 24.7 percent to 886 tonnes last year even as output from the world's top consumer climbed 5.5 percent, the China Gold Association said. Spot silver slid 2.3 percent to $16.84 an ounce. Platinum was down 2.3 percent at $1,222.90 an ounce and palladium dropped 1.6 percent to $781.20 an ounce.