Gold prices fell for a fourth successive session on Thursday, under pressure from investors taking heart from the strength of the dollar following a string of data that suggested the US economy was gaining traction.
Spot gold was bid at $1,368.10 an ounce at 1600 GMT, against $1,377.65 late in New York on Wednesday. US gold futures for February delivery were down 0.4 percent at $1,368.60.
A string of robust US data have driven the dollar higher on expectations the United States may recover faster than other major economies. The numbers have raised expectations that Friday's key jobs data will be positive.
A larger-than-expected rise in weekly initial jobless claims on Thursday did little to dispel this notion, putting gold under pressure against the dollar and undermining its appeal as a shelter from risk.
"Really, what's behind this correction is probably the stronger US economic data," said Mitsubishi analyst Matthew Turner. "There is always the fear that once the rebound in the US gets cemented and attracts higher interest rates, investors start shifting money out of gold and into equities."
"This fear that government debt and deficits will require loose monetary policy for a longer time was the driving force behind gold's rally and that hasn't changed," he said.
U.S Treasury yields have risen by a full percentage point in the last two months alone as investors have readjusted their expectations for US growth and inflation.
Given that gold is a non-interest bearing asset, the opportunity cost of holding it falls when rates are low.
"That is creating some pressure in that market, but I think it is very unlikely to be sustained," said Deutsche Bank analyst Daniel Brebner.
"Ultimately the risk of higher interest rates this year is very, very low. There are still lots of risks to growth."
European shares extended their new-year rally, reaching their highest since September 2008 after the US data.
"We are happy that gold is unwinding from overbought momentum conditions as it allows for further longer-term upside progression, in line with our underlying bullish view," said Barclays Capital in a note.
"We would look to build long positions in the $1,360 area... in anticipation of gains through the $1,432 all-time high to our initial upside targets at $1,460/1,480... Below the $1,350/1,340 area would force us to reconsider our near-term positioning."
Investment demand for gold-backed exchange-traded funds remained lacklustre, with holdings of the world's largest gold ETF, New York's SPDR Gold Trust, dropping by nearly 4 tonnes on Wednesday to their lowest in early June.
Among other precious metals, silver was at $29.03 an ounce against $29.24, platinum was at $1,726.99 an ounce versus $1,726.50 and palladium at $758.47 against $773.