Gold extended a 2% drop in New York, erasing some of this week's gains as the US dollar rose against the euro ahead of an expected rate cut and reduced bullion's appeal as an alternative investment.
Dealers also awaited the release of US nonfarm payrolls data on Friday, which could further stoke fears of a global recession and drive investors into less volatile assets.
Gold was trading at $US738.65 an ounce, down $US1.95 an ounce from New York's notional close on Wednesday, when it dropped around $US20 due to a firmer dollar and tumbling oil.
"The US job data will be released this week and it's going to show bad numbers. So, crude oil and all commodities will be down sharply,'' said Kazuhito Saito of Interes Capital Management.
"Sentiment is bearish,'' said Saito, adding that gold could revisit recent lows.
Bullion has gained as much as 6.2% this week to hit a session high of $US768. It was still down from a two-month high of $US931 hit in October but significantly higher than a 13-month low of $US680.80 also struck last month.
Gold was struggling to revisit a lifetime high of $US1,030.80 in March, partly blamed on a recent slump in the equities markets that forced investors to sell bullion to cover margin calls. Losses in other commodities have also put pressure on gold.
The euro fell to $US1.2905 after data showed the euro zone service sector tumbling to a decade low, adding to the view the European Central Bank will cut interest rates by 50 basis points from the current 3.75% level. Investors also anticipate the BoE will cut interest rates - now at 4.5% - by at least half a%age point. Oil slipped towards $US65 a barrel on recession fears. But attention would be centered on Friday's payroll data after ADP Employer Services' data showed private employers made their deepest job cuts in six years in October.
The Reuters-Jefferies CRB Index, a global commodities benchmark that tracks 19 futures markets, lost more than 3% on Wednesday after data showed US private sector employers cut the most number of jobs last month in six years.
"Intermittent rallies are unlikely to result in large gains as swift profit taking might emerge. I guess gold could revisit last month's low around $US680,'' said a regional dealer.
Other precious metals also tracked gold lower, with platinum falling more than 4% after hitting a two-week high in the previous season on bargain hunting and Anglo Platinum, the world's biggest producer of platinum, shut its smelter.
Platinum was trading at $US832.50 ounce, down $US30.00 from New York's notional close on Wednesday, when it rallied to a two-week high of $US882 an ounce on bargain hunting.
Angloplat said on Wednesday it would lose up to 200,000 ounces of refined platinum after shutting down its Polokwane smelter following an incident.
New York gold futures fell $US2.6 an ounce to $US739.8.
