Gold fell 1 percent on Friday, its biggest one-day loss in over a month, after encouraging U.S. payrolls data smashed hopes of extra stimulus from the Federal Reserve, which had been priced into bullion's recent rally.
Wall Street equities and industrial commodities -- plus U.S. Treasury yields, an indicator of short-term interest rates -- all rose on news the U.S. economy created jobs in January at the fastest pace in nine months.
After four consecutive weekly gains, bullion posted a small weekly loss as Friday's sell-off wiped out profits from earlier this week. However, it is still up 11 percent year to date.
Analysts had warned of a pullback after bullion rallied on hopes of immediate Fed actions to boost growth. The Fed said last week it would likely keep rates low until at least late 2014 and that it was ready to offer the economy additional stimulus.
The jobs report has taken the market's anticipation of additional quantitative easing off the table, said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC. With the bond yields and short-term interest rates jumping off the report, you could see more profit-taking in gold beyond just today and into the next several sessions, McGhee said.
Spot gold was down 1.1 percent at $1,739.19 an ounce by 2:20 p.m. EST (1920 GMT), after having earlier peaked at a 2-1/2 month high at $1,762.90.
U.S. gold futures for April delivery settled down $19 an ounce at $1,740.30, with trading volume in line with its 30-day average.
U.S. nonfarm payrolls jumped 243,000, the Labor Department said, as factory jobs grew by the most in a year. The unemployment rate fell to 8.3 percent -- the lowest since February 2009 -- from 8.5 percent in December.
Better job news suggests that QE3 doesn't necessarily have to be locked and loaded at least at this point. The postponement of further monetary easing snuffed out at least a pullback in gold prices, said Mark Luschini, chief investment strategist of Janney Montgomery Scott, a broker-dealer with about $54 billion in assets under management.
Silver was down 1.6 percent at $33.73 an ounce.
Silver was the best performer among major precious metals last month, rising more than 20 percent. American Eagle silver coin sales totaled 6.1 million ounces in January, their second-strongest month since the U.S. Mint introduced them in 1986.
Near-Zero Interest Rates
Even though analysts said Friday's job numbers could delay another round of Fed monetary easing, gold should still be underpinned by rock-bottom interest rates, which minimize the cost of holding the zero-yielding asset.
Fed Chairman Ben S. Bernanke at a congressing hearing on Thursday defended the central bank's policies, saying the economy still needs plenty of support.
Among other precious metals, spot platinum eased 0.1 percent to $1,625.74 an ounce, while spot palladium fell 0.2 percent to $703.93 an ounce.
Platinum prices are up about 16 percent this year, supported by concerns over output of the metal from major producer South Africa.
(Editing by Lisa Shumaker and Bob Burgdorfer)