Singapore: Gold edged lower on Thursday following a short-covering rally in the previous session, weighed down by concerns the U.S. Federal Reserve could soon begin tapering its monetary stimulus on strong economic data. Bullion prices rose the most in over a month on Wednesday despite strong data on U.S. private-sector hiring and service industry growth in the run up to the nonfarm payroll data on Friday. The short-covering gains came after gold hit fresh five-month low for three straight sessions. "The markets are still positioned quite short. There is going to be a bigger reaction to a weaker-than expected nonfarm payrolls report than to stronger-than-expected numbers," said Victor Thianpiriya, an analyst at ANZ. "If it's a strong report, it would just give the existing shorts a bit more validation and we could see prices go back to USD 1,220," he said. Prices risk falling to USD 1,180 - gold's three-year low hit in June - if they drop below USD 1,215, Thianpiriya said. Spot gold had fallen 0.4 percent to USD 1,238.23 an ounce by 0345 GMT, after gaining 1.6 percent in the previous session. Silver also edged lower after climbing nearly 3 percent in the previous session. Investors are in data-watch mode to determine how soon the Fed could begin scaling back its USD 85 billion in monthly bond purchases. They worry that strong data could prompt the central bank to taper from this month, with a policy meeting Dec. 17-18. The bond-buying stimulus has strongly supported gold prices as it boosts the metal's inflation-hedge appeal. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 2.70 tonnes to 838.71 tonnes on Wednesday - their lowest since early 2009.

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