[LONDON] Gold fell one per cent on Thursday as dollar jumped versus the euro after the European Central Bank cut inflation forecasts, while a US jobs report that could provide clues on the timing of a Federal Reserve rate rise remained in focus.
The ECB left interest rates unchanged at record lows as expected, but lowered its forecasts for inflation and economic growth, citing a slowdown in emerging markets and weaker oil prices.
As a traditional hedge against inflation, gold suffered from the downward revision.
Spot gold fell as much as 1.1 per cent to a session low of US$1,121.35 an ounce and was down 0.8 per cent at US$1,124.41 by 1331 GMT. US gold for December delivery slipped $11.70 to US$1,121.90.
"No help for gold today: jobless claims, ECB hold(ing) rates unchanged, gains in stocks and wages show(ing) no inflation," said RBC Wealth Management advisor George Gero.
The dollar rose 0.6 per cent against a basket of leading currencies, while global investors stepped back into riskier equities, hurting bullion.
US weekly jobs data indicated a strengthening labour market, a day ahead of the more critical monthly jobs report, which may prompt the Fed to increase rates sooner than later.
New applications for unemployment benefit rose more than expected last week, but the underlying trend remained consistent with a strengthening labour market.
The main focus is now the US non-farm payrolls data, due at 1230 GMT on Friday, which should give a clearer picture about the strength of the world's biggest economy.
"Only amazingly good US data would bring the prospect of the rate hike back to September from December," Citi strategist David Wilson said. "That could put immediate further pressure on the gold price."
Bullion traders remain wary of taking up new positions until they receive more clarity on whether the Fed will raise rates at its next meeting on Sept. 16-17, analysts said.
Higher interest rates would increase the opportunity cost of holding non-yielding bullion.
The technical picture for gold looked bearish with near-term support at US$1,117, ScotiaMocatta analysts said. "We are bearish gold so long as it trades below the recent high of $1,170." Also weighing on bullion was the absence of Chinese buyers. Markets in China, a major gold consumer, are closed on Thursday and Friday for public holidays.
Other precious metals were also under pressure, with silver down 0.3 per cent to $14.66 an ounce and platinum falling about 0.6 per cent to US$1,006.46. Palladium fell 0.2 per cent to $581.50.