Gold fell on Friday as a stronger dollar and worries over Europe's debt crisis knocked appetite for bullion, overshadowing upbeat jobs data from the United States that pointed to better growth across the Atlantic.
Spot gold fell 0.62 percent to $1,612.69 an ounce by 17:21 SA time but was still on course for a weekly rise of nearly 3 percent, its strongest in a month.
US gold fell 0.38 percent to $1,614.10.
“Towards the latter part of last year, gold's correlation with other commodities and other risk assets increased substantially, so it's not surprising that's continued into the beginning of this year,” said Natixis analyst Nic Brown.
“Payrolls (data) was good for risk sentiment. It should help gold, but against that it also helped the dollar,” added Brown.
The US Labor Department said 200,000 workers were added to non-farm payrolls in December, marking the largest monthly rise since September 2011 and exceeding expectations of 150,000, while the unemployment rate fell to 8.5 percent.
Gold see-sawed following the release of the data to eventually settle lower as the euro hit a nearly 16-month low against the dollar.
Dollar-priced gold usually moves counter to the US currency, because a strong dollar makes gold more costly for non-US investors. Although the relationship broke down for most of this week, it has unsurprisingly reasserted itself, analysts said.
In the wider markets, equities on both sides of the Atlantic were down, while US treasuries rose as risk aversion returned, with investors expressing concern about sovereign and bank funding problems in the euro zone.
Technical analysis suggested spot gold could retrace to $1,596.24 an ounce during the day, said Reuters market analyst Wang Tao.
Although US economic data in recent weeks have shown solid progress in the fourth quarter, analysts said the global economy will remain overshadowed by the euro zone debt crisis and that this will help gold in the longer term.
“There have been good data out of the US, but ultimately the US can't decouple from the European crisis,” said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.
“There are going to be enough reasons to be worried about global growth and the financial system in the next quarter or two, and gold should benefit from that.”
Fears over the outlook for the euro zone banks have grown since Italy's UniCredit this week was forced to offer deep price discounts to sell new shares and shore up its crisis-ravaged balance sheet.
Next week Spain and Italy will hold closely watched debt auctions, after bond sales by France and Germany this week were greeted with solid demand.
Spot silver fell 2.15 percent to $28.65 an ounce, headed for a weekly climb of 3.2 percent - its biggest rise in a month.
Spot platinum fell 1.01 percent to $1,396.25 an ounce, while spot palladium sank 2.71 percent to $617.75 an ounce. - Reuters