Gold fell more than 1 percent in choppy trade on Friday as investors turned to the perceived safety of the dollar, relinquishing the euro and bullion after U.S. data showed employers hired at a dismal pace in June.
U.S. non-farm payrolls expanded by just 80,000 jobs in June, falling short of forecasts though a tad higher than a revised May reading of 77,000. The country's unemployment rate stayed at a lofty 8.2 percent, meanwhile.
Gold initially rallied in response to the report, touching a session high of $1,609.39 an ounce 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 $1,583.99 an ounce as the dollar rose to fresh five-week highs against the euro, reducing gold's appeal as an alternative asset to the U.S. currency.
Spot gold was down 0.91 percent at $1,589.79 an ounce at 1325 GMT from $1,604.33 at Thursday's close and was on course for a weekly fall of 0.5 percent.
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 U.S. dollar over gold as a safe haven asset of choice, even though its value is being eroded by easier monetary policy.
The U.S. gold futures contract for August delivery edged down 1.25 percent to $1,589.20 an ounce.
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 coordinated cuts were played down.
While the ECB cut was near-term bearish for gold as it weakened the euro, it may be more bullish longer term. Added global liquidity with policy easing measures from the euro zone, China, and the Bank of England may stimulate demand for hard assets, including gold, said HSBC in a note.
PHYSICAL BUYING SUBDUED
There was little support for gold from the physical market, where bullion demand remained subdued after prices rose above $1,600 and potential sellers eyed $1,620 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 jewelers were likely to enter the market if prices dropped to $1,550 to $1,560.
In another sign of weak physical demand, Hong Kong shipped 75,456 kg of gold to mainland China in May, down 26 percent from the previous month, trade data showed.
In other precious metals, silver dropped 1.52 percent to $27.24 an ounce, platinum eased 1.46 percent to $1,447.75 an ounce, and palladium fell 0.55 percent to $577.56.
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.