Spot gold was up 0.4 percent at USD 1,231.00 an ounce, while US gold futures for February delivery were up USD 4.00 an ounce at USD 1,229.50.
London: Gold prices firmed on Thursday after two days of losses as the dollar index retreated from seven-week highs, but moves were muted as traders took to the sidelines ahead of a report on the U.S. jobs market on Friday.
Monthly non-farm payrolls data for December is being watched for clues on the timetable for further tapering of U.S. monetary stimulus, traders said. Weekly U.S. jobless figures on Thursday could also prompt moves in gold.
Spot gold was up 0.4 percent at USD 1,231.00 an ounce at 1258 GMT, while U.S. gold futures for February delivery were up USD 4.00 an ounce at USD 1,229.50.
The metal has risen nearly 2 percent this month as stock markets corrected and Chinese consumers bought ahead of the Lunar New Year, but its early strength has waned as European stocks rebounded to 5-1/2 year highs.
"Last year, gold was often negatively correlated with the S&P 500," Peter Fertig, a consultant with Quantitative Commodity Research, said. "At the beginning of this year, money was flowing back from stocks into gold, but as we`ve seen a stabilisation of the stock market, we`ve seen money leaving gold and going back into equities."
Prices hit a one-week low after Wednesday`s ADP private sector jobs report lifted expectations that the Federal Reserve will curb its bond-buying scheme sooner rather than later after opting to cut monthly purchases by USD 10 billion in December.
"For tomorrow, I expect the labour market report will come in slightly above expectations, as has already been indicated by the ADP report," he said. "That will overall be positive for the stock market and negative for the precious metals."
Minutes of the Fed`s last policy meeting released on Wednesday signalled the bank would be cautious in scaling back the programme. Expectations that the scheme was coming to an end was a key factor in last year`s 28 percent gold price drop.
The European Central Bank is also scheduled to give a news conference on policy at 1330 GMT, after opting to keep rates on hold as expected earlier today.
CHINESE BUYING STEADIES
Buying of gold in China, which is tipped to have taken over from India as the world`s biggest bullion consumer last year, steadied on Thursday after a strong start to the week, dealers said. Premiums on the Shanghai Gold Exchange held at USD 17.
The world`s largest gold-backed exchange-traded fund, New York`s SPDR Gold Shares, reported its first outflow of the year yesterday, of 1.5 tonnes, taking its holdings to a five-year low of 793.121 tonnes.
Last year the fund saw an outflow of more than 550 tonnes, the first year its holdings had fallen since its launch in 2004. Commodity exchange traded products suffered their worst year on record in 2013 as investors dumped their gold holdings and joined the equity rally, BlackRock data showed.
Bank of America Merrill Lynch said on Thursday it has cut its 2014 gold price forecasts by 11 percent to $1,150 an ounce, and its silver price forecasts by 21 percent to USD 18.38.
"While index rebalancing may support gold until 14 January, we see limited support to prices beyond that," it said. "Our continued bearish view is driven by the challenging macro-economic environment, which is best captured by rising U.S. 10-year rates and a persistent lack of inflation pressures."
Among other precious metals, silver was up 0.6 percent at USD 19.62 an ounce, while spot platinum was up 0.3 percent at USD 1,417.24 and spot palladium was up 0.3 percent at USD 735.60.