Gold prices edged down on Friday as a stronger dollar hurt European appetite for the metal and as investors waited for U.S. jobs data to help gauge the health of the world's top economy.
Some traders said Thursday's better-than-forecast private U.S. employment data indicated that non-farm payroll numbers due on Friday could also be robust, dampening hopes for further quantitative easing and hurting appetite for gold.
“I would certainly highlight yesterday's ADP (private sector employment) number. If that means we're going to get good non-farm payrolls this afternoon, the likelihood of (a third round of U.S.) quantitative easing diminishes significantly, which is very bad for gold,” Natixis analyst Nic Brown said.
Quantitative easing by central banks devalues paper currencies and boosts appetite for hard assets such as gold.
Spot gold was down at $1,593.25 an ounce at 0957 GMT on Friday, on course for a weekly fall of 0.3 percent.
The U.S. gold futures contract for August delivery edged down 0.97 percent to $1,593.80.
Adding pressure to gold, the dollar stayed close to five-week highs against the euro, as investors remained disappointed that the European Central Bank did not follow its rate cut Thursday with bolder easing measures.
The ECB cut followed on from action by the Chinese and UK central banks, which together only served to signal a growing level of alarm about the world economy, although suggestions of coordinated action 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 eurozone, China, and the Bank of England may stimulate demand for hard assets, including gold,” said HSBC in a note.
Key to the question of added global liquidity however is the U.S. jobs report due at 1230 GMT. On Thursday private sector data showed employers added a surprise 176,000 jobs in June.
A Reuters poll showed expectations were for non-farm payrolls to expand by just 90,000 jobs in June.
Technical analysis suggested that spot gold could fall to $1,586 an ounce during the day, Reuters market analyst Wang Tao said.
PHYSICAL BUYING SUBDUED
The physical bullion market remained subdued, with buyers sidelined after prices rose above $1,600 and potential sellers eyeing $1,620 or above, dealers said.
“The current price level isn't attractive enough to lure buyers back,” said Peter Tse, director at ScotiaMocatta in Hong Kong, adding that jewellers 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 0.72 percent to $27.46 an ounce, platinum eased 0.78 percent to $1,457.75 an ounce, while palladium fell 1.06 percent to $574.63.
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. -Reuters