The U.S. dollar index was up 0.19% to $81 while the euro was slightly lower at $1.29 vs. the dollar. The spot gold price was losing $1.20, according to Kitco's gold index.
Gold slowed this week's bleeding after December's job growth lifted gold's appeal as a safe-haven asset.
The private sector only added 113,000 jobs in December much lower than the 200,000 expected. The only upside was that the unemployment rate dipped to 9.4% as perhaps people left the work force.
The conflicting datapoints confused investors somewhat and gold prices like confusion. Gold had been down double digits for the second time this week and then rallied modestly, but settled slightly below the 50-day moving average.
Gold prices need to hold above the 100-day moving average of $1,330 an ounce or else face an even deeper correction. Traders who sold positions this week will most likely keep cash on the sidelines until they are sure the deep correction is over.
Thursday was "the fourth day of consecutive declines," says Jon Nadler, senior analyst at Kitco.com. "Pretty much the largest two-day decline [since Wednesday night] in about a year." Prices have shed 4.4% this week.
If "gold manages eventually ... to overcome the previous highs of $1,430 then we could look for another $50 addition in value," predicts Nadler. "Absent that and absent buyers ... we could revisit in fact the mid-$1,200's to $1,300."
Leading the charge in gold's selloff was growing investor confidence in the U.S. economic recovery because of improving economic data.
A consequence of better data is that investors become less enamored of putting their cash into government bonds. As a result, yields have risen, making the U.S. dollar worth more. Gold and the dollar often move inversely to each other.
The underlying expectation is that if the jobs landscape improves and if growth continues then the Federal Reserve might alter its $600 billion bond-buying program or raise key interest rates. This seems like a long shot, however, as the Fed in its minutes for December, reiterated its commitment to the program and Friday's jobs number failed to produce its big wow factor.
Also Fed Chairman Ben Bernanke said in testimony to the Senate Budget Committee this morning that the jobs market could take four to five years to normalize.
The Fed most likely will wait until the seasonality shakes out of the jobs market before considering any policy decisions, so those betting on gold as protection against a loose monetary policy can keep doing so.
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