[LONDON] Gold fell two per cent on Thursday after better-than-forecast US jobs data boosted the dollar, reviving expectations the Federal Reserve could raise interest rates soon.
Data on Thursday showed claims for state unemployment benefits declined 34,000 to a seasonally adjusted 262,000 for the week ended April 25, the lowest reading since April 2000.
Separately, US consumer spending rose 0.4 per cent last month after rising 0.2 per cent in February, while the Chicago Purchasing Management Index jumped more than expected in April.
Spot gold was heading for its biggest daily fall since March 6, dropping as much as 2 per cent to a session low of US$1,179.77 an ounce earlier. It was down 1.9 per cent at US$1,181.32 an ounce by 1404 GMT.
The metal had hit a three-week high ahead of the Fed's statement that followed a two-day policy meeting on Wednesday, as a string of soft economic data dimmed prospects for a US interest rate increase in June.
US gold futures for June delivery dipped US$29.30 an ounce to US$1,181.00.
"It looks like the trigger (for today's weakness) was the US data, with strong jobs creation," Saxo Bank senior manager Ole Hansen said. "Since the Fed yesterday said it is not too worried (about the economic slowdown) because it's seasonal, a set of data that points towards confirming that statement, makes the market a bit jittery."
The dollar rose 0.2 per cent against a basket of currencies after the US jobs data, rebounding from a nine-week low hit following soft economic growth numbers for the first quarter on Wednesday.
Although the Fed downgraded its view of the US labour market and economy on Wednesday, it said the poor performance was in part due to transitory factors, not effectively ruling out raising rates at its next meeting.
"Ultimately the determinant for sustained price direction will come from the rate hiking cycle once it is underway ... the inevitability of that remains the constraint on gold prices," Standard Chartered analyst Nicholas Snowdon said.
Higher rates would dent demand for bullion, a non-interest-paying asset.
Physical bullion demand in Asia has quietened in recent days as gold held above US$1,200 an ounce. A significant pick-up in demand would support global prices.
Silver followed gold lower, losing 4 per cent to US$15.93 an ounce. Platinum fell 2 per cent to US$1,130.45 an ounce, while palladium was down 1.4 per cent at US$769.22 an ounce.