Gold retreated from a record high above $1,120 an ounce on Thursday and global stocks lost ground as doubts about a lasting economic recovery underpinned the dollar.
Stocks slumped as the U.S. dollar strengthened against other currencies, also on technical factors.
The yellow metal pushed to a record high on the momentum of months of dollar weakness, only to drop $15.35 to $1,102.40 as the currency recovered. A weak greenback makes metals priced in dollars less expensive for holders of other currencies.
Gold's rally from near $800 an ounce in January and the upcoming yearend also prompted investors to book profits.
Gold's weakness (on Thursday) was a reflection of profit-taking after the metal's recent impressive run, said Peter Buchanan, commodities analyst at CIBC.
The dollar also rose after the euro failed to break through and hold above the psychologically important 1.50 level. The euro declined 0.92 percent to $1.4843. The dollar rose 0.56 percent against the Japanese yen, to 90.32 yen.
Prospects that U.S. interest rates will remain at negligible levels for some time are expected to continue weighing on the dollar. It rebounded 0.67 percent against a basket of major currencies on Thursday but is still down nearly 1 percent this month and 14.5 percent since early March.
With a light economic data calendar on Thursday, apart from strong Australian jobs numbers that boosted the Aussie dollar to a 15-month high, the broader market consolidated.
In the U.S., the Labor Department reported that first time claims for unemployment insurance fell to 502,000 in the latest week from 514,000 in the previous period. That was less than forecast, but supported the view of a fragile recovery.
World stocks weakened, with the MSCI all-country world index <.MIWD00000PUS> down 0.9 percent and the emerging market component <.MSCIEF> off 1.36 percent.
The main U.S. indexes drifted lower. The Dow Jones Industrial Average <.DJI> busted a six-session rally as a stronger dollar hurt commodity shares. Wal-Mart Stores Inc
The Dow Jones average fell 93.79 points, or 0.91 percent, to 10,197.47. The Standard & Poor's 500 Index <.SPX> declined 11.27 points, or 1.03 percent, to 1,087.24 and the Nasdaq Composite Index <.IXIC> edged lower by 17.88 points to 2,149.02.
European shares dropped with the FTSEurofirst 300 <.FTEU3> index off 0.1 percent to 1,014.91.
Investors globally remained fairly bullish, however, with signs parts of the world economy are gaining traction.
The Baltic Dry Freight Index <.BADI>, which can be a proxy for world trade patterns, rose 5.5 percent, pushed up by freight of iron ore to China.
A 10th straight increase for the Baltic Dry and a 15-month high for AUD/USD (Australian/U.S. dollar) do not imply that sentiment is about to turn over, Kenneth Brough, an economist at Lloyds TSB, said in a research note.
U.S. Treasuries climbed after the government wrapped up $81 billion of sales this week, and as falling stocks increased the allure of bonds as a haven from risk.
The yield on the benchmark 10-year Treasury note fell by 0.04 percentage point to 3.44 percent.