Gold price steadied on Friday after choppy trading in the previous session and was headed for a weekly decline as improving U.S. economic data raised fears of an early end to monetary stimulus.
Investors are now awaiting U.S. non-farm payroll data, due to be released at 1330 GMT, which could provide more clues on the timing of the tapering of stimulus measures in the world's largest economy.
"The jobs report today is a crucial catalyst for any upside or downside in gold prices going forward," said Helen Lau, an analyst at UOB-Kay Hian Securities in Hong Kong.Given recent drops in gold prices, most of the expectations for a December tapering have already been priced in and a strong report would not see prices fall dramatically, Lau said.
A weaker jobs report would have more of an impact on prices than a stronger one, analysts said. Nonfarm payrolls are expected to have increased by 180,000 last month, according to a Reuters survey of economists.
Spot gold was up 0.3 percent at $1,228.09 an ounce by 0648 GMT. The metal is headed for a 2 percent weekly drop after falling to five-month lows earlier in the week. Prices fell by as much as 2 percent on Thursday after data showed the U.S. economy grew faster than initially estimated in the third quarter.
The U.S. Federal Reserve has tied a tapering of its bond-buying programme to an improvement in the labour market. Gold prices have benefited from the $85 billion monthly bond purchases which burnish the metal's appeal as a hedge against inflation.
In the physical market, Indian gold premiums hit a record $160 an ounce on Thursday, as the wedding season fuelled demand while supplies remained low. Premiums in other parts of Asia remained stable, as lower prices failed to trigger a surge in demand.