LONDON - Gold fell more than 1% in choppy trade on Friday as investors turned to the perceived safety of the dollar, relinquishing the euro and bullion after US data showed employers hired at a dismal pace in June.
US non-farm payrolls expanded by just 80000 jobs in June, falling short of forecasts though a tad higher than a revised May reading of 77000. The country's unemployment rate stayed at a lofty 8,2%.
Gold initially rallied in response to the report, touching a session high of $1609,39/oz on the view that the poor number would pile pressure on the Federal Reserve to ease monetary policy further.
The metal then turned sharply negative, touching a day low of $1583,99/oz as the dollar rose to fresh five-week highs against the euro, reducing gold's appeal as an alternative asset to the US currency.
Spot gold was down 0,91% at $1589,79/oz at 1.25pm GMT from $1604,33/oz at Thursday's close and was on course for a weekly fall of 0,5%.
"The precious metals bounced strongly when the (payroll) numbers turned out to be below expectations. But after all the data is a bit mixed: it is not bad enough to suggest the Fed will go ahead with a new round of quantitative easing but at the same time it is not good enough to exclude it," said T-commodity consultant Gianclaudio Torlizzi.
Quantitative easing by central banks devalues paper currencies and should in theory boost investor appetite for hard assets such as gold, traditionally seen as a hedge against inflation.
Gold does not always benefit from the above scenario, however, as economic conditions poor enough to spark quantitative easing sometimes lead investors to sell gold to cover losses in other assets.
Investors can sometimes also pick the US dollar over gold as a safe-haven asset of choice, even though its value is being eroded by easier monetary policy.
The US gold futures contract for August delivery edged down 1,25% to $1589,20/oz.
On Thursday, central banks in Europe, China and Britain announced rate cuts or further monetary easing in a bid to boost growth, but the combined move only served to signal a growing level of alarm about the world economy, even though suggestions of co-ordinated cuts were played down.
There was little support for gold from the physical market, where bullion demand remained subdued after prices rose above $1600/oz and potential sellers eyed $1620/oz or above, dealers said in Asia.
"The current price level isn't attractive enough to lure buyers back," said Peter Tse, director at ScotiaMocatta in Hong Kong, adding that jewellers were likely to enter the market if prices dropped to between $1550/oz and $1560/oz.
In another sign of weak physical demand, Hong Kong shipped 75456kg of gold to mainland China in May, down 26% from the previous month, trade data showed.
In other precious metals, silver dropped 1,52% to $27,24/oz, platinum eased 1,46% to $1447,75/oz and palladium fell 0,55% to $577,56/oz.
Latest data showed holdings of the largest gold-backed exchange traded-fund (ETF), New York's SPDR Gold Trust and that of the largest silver-backed ETF, New York's iShares Silver Trust remained unchanged on Thursday from Wednesday.