Gold edged down to $US960 an ounce on Friday on caution that an expected improvement in a key US jobs report later in the day would hurt the precious metal's allure as a safe haven at a time of economic turbulence.
Economists in a Reuters survey forecast the US Labor Department report will show 320,000 workers lost their jobs in July, the least for any month since September and compared with a loss of 467,000 jobs in June.
But gold's fall may be limited because the US dollar could fall on easing risk aversion if the jobs report restores optimism that the US economy is on the mend, traders said.
A weaker US dollar makes gold, which is priced in dollars, more attractive for holders of other currencies.
Spot gold was down 0.2 per cent at $US960.60 an ounce, compared with New York's notional close of $US962.15.
Earlier on Thursday it rallied as high as $US971.25, its highest since June 5, on inflation worries as the Bank of England stunned markets with a big increase in bond buying to stimulate the economy.
Global monetary easing, combined with the recent fall in the dollar, have propped up gold after the metal was pressured by deflation fears earlier this year.
Bullion is poised to rise 0.7 per cent on the week, marking the fourth straight week of gains as it recovered from a July trough of $US905.80.
US gold futures for December delivery edged up to $US963.40 an ounce. The contract fell $US3.40 to $US962.90 on the COMEX division of the New York Mercantile Exchange on Thursday.
"Everybody is looking for the report tonight," said Dick Poon, manager of precious metals at Heraeus in Hong Kong, referring to the US jobs report for July.
A market consensus that the July report will show an improvement, together with the fairly high price of gold in a historic context, means gold could extend its consolidation before investors step in to buy at around $US950, he said.
"But improvement for one or two months isn't enough ... Gold is still a safe haven," he said.
Even if the US jobs data is as expected and gold falls after it, another focus lies on how currencies react to the data, said Tatsufumi Okoshi, a senior economist at Nomura Securities.
"Bullish US economic data often triggers a sell-off in the dollar ... If so, there's a chance that a weaker dollar will make gold resilient," Okoshi said.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings stood at 1,072.87 tonnes as of August 6, unchanged since July 29.