Gold prices extended declines on Thursday, retreating more than 1% as the number of Americans filing new claims for unemployment benefits dropped last week, pointing to a strengthening labor market and boosting the dollar.

Spot gold fell 1.2 % to $1,884.71 per ounce by 1234 GMT. US gold futures eased 0.9% to $1,893.30.

While prices in the near term will be driven by still elevated inflation, gold is expected to move downwards over the next six to 12 months on expectation that at some point the US Federal Reserve will speak about tapering, said UBS analyst Giovanni Staunovo.

The dollar index edged 0.3% higher against its rivals, making gold less appealing for other currency holders.

Initial claims for state unemployment benefits fell below 400,000 last week for the first time since the COVID-19 pandemic started more than a year ago, data showed on Thursday.

The US economic recovery accelerated in recent weeks even as a long list of supply chain troubles, hiring difficulties, and rising prices cascaded through the country, Fed officials said on Wednesday.

Focus now turns to key US non-farm payroll numbers due on Friday.

"Employment is likely to become a decisive factor, with a high reading having the potential to force the Fed to start thinking about tapering its current monetary and asset purchase policies," Ricardo Evangelista, a senior analyst at ActivTrades, said in a note.

Elsewhere, silver fell 2.4% to $27.53 per ounce, palladium fell 2.1% to $2,797.97, while platinum slipped 1.5% to $1,171.55.