Gold held steady on bargain hunting on Thursday after prices slipped below $1,200 an ounce but firm stock markets were likely to weigh, and holdings on the ETF fell slightly.
Investors await the release of more data from the United States, particularly the payrolls report, which will offer clues on the health of the economy. Friday's government report on jobs may show a drop of 65,000 in July as census jobs dried up.
Spot gold added 10 cents to $1,194.70 an ounce by 0205 GMT after rising to a 2-week high on Wednesday as physical buying, better-than-expected U.S. jobs data and hopes for stronger Chinese demand lifted the metal for its sixth straight daily gain.
It's still a very tricky market to call on the near term. I suppose the positive sign for gold now is that it has held up some pretty heavy selling pressure toward $1,150, said Mark Pervan, senior commodities analyst at ANZ in Melbourne.
If we start to see the relationship being re-established for the negative correlation with the U.S. dollar, then there's a potential for gold prices to move back up into the $1,200 to $1,250 range pretty quickly.
Gold has risen despite a stronger dollar as it gradually reverses a trend earlier this year when the metal moved in tandem with the U.S. currency, driven by safe-haven demand.
U.S. gold futures for December delivery were also steady at $1,196.5 an ounce after hitting a high of $1,199.5.
The U.S. dollar was mostly higher in Asia on Thursday after U.S. economic data beat the market's low expectations and sparked a bout of short-covering, though the overall mood remains bearish into the key payrolls report.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P), said its holdings fell to 1,281.834 tonnes by August 4 from 1,282.279 on July 28. The holdings hit a record at 1,320.436 tonnes on June 29.
I think the market needs to consolidate first, then we will see if the Chinese will start to buy gold. But we do see light physical buying and short covering after prices slip below $1,200, said a dealer in Hong Kong.
People are cautious ahead of the payrolls data, he added.
China said on Tuesday it would allow more domestic banks to export and import gold as part of steps to encourage more liquid trade, which could underpin the country's growing private demand for the metal.
Japan's Nikkei rose 2 percent on Thursday after U.S. stocks firmed in thin trade as retailers' earnings and a report showing a slight improvement in private employment boosted optimism ahead of Friday's payrolls report. .T .N
(Reporting by Lewa Pardomuan; Editing by Clarence Fernandez)