Gold dropped to a 10-day low on Thursday in U.S. trading as encouraging employment data reduced the need to invest in the precious metal as a hedge option.

May-dated gold fell to $879.80, down $13.70 for the session. Prices touched as low as $873.20 earlier in the day.

The dollar saw mild strength against the euro amid choppy movement, touching a four-day high in the morning, and also climbed away from a three-month low versus the sterling. Gold usually moves opposite the dollar because of the metal's hedge appeal.

On the economic front, the U.S. Department of Labor revealed that initial jobless claims fell to 610,000 for the week ended April 11th, down 53,000 from the previous week's revised figure. The 4-week moving average for initial claims, a statistic that flattens out week-to-week fluctuations in the data, dipped 8,500 to a level of 651,000.

Meanwhile, a Commerce Department report showed that housing starts fell 10.8 percent to an annual rate of 510,000 in March from the revised February estimate of 572,000. Economists had expected starts to slip to 540,000 from the 583,000 originally reported for the previous month.

Later in the morning, the Philly Fed said its index of activity in the sector rose to a negative 24.4 in April from a negative 35.0 in March, with a negative reading indicating a contraction in the sector. Economists had expected a more modest increase to a negative 32.0.

Gold settled Wednesday at $893.50 per ounce, up $1.50 for the session. Earlier, gold touched as low as $886.20.

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