Gold falls ahead of U.S. payrolls data despite weak dollar

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON (Reuters) - Gold fell on Thursday as the impact of a weaker dollar was offset by positive U.S. economic data that offered hope the labour market continues to expand even as growth has stalled, ahead of Friday's important U.S. nonfarm jobs report.

Spot gold fell 0.3 percent to $1,200.10 an ounce by 3:01 p.m. EDT (12.31 a.m. IST). U.S. gold for June delivery slipped $7.30 an ounce to settle at $1,200.90.

The metal reversed initial gains after data showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, while February's U.S. trade deficit narrowed to it lowest point since October 2009.

The dollar, however, remained under pressure on views that U.S. economic growth slowed sharply in the first quarter.

Investors turned their attention to Friday's U.S. nonfarm payrolls, which economists polled by Reuters forecast to show an increase of 245,000 in March after a 295,000 rise in February.

"There is a lot of book-squaring ahead of the long Easter weekend. We can definitely see liquidity already thinning this afternoon and there is a lot of uncertainty about tomorrow's nonfarm payrolls number," said Afshin Nabavi, MKS SA head of trading.

Trading is expected to thin on Friday, when most U.S. markets will be closed for the Easter holiday, while some European markets will close from Friday through to Monday, reopening on Tuesday.

"Good news for the economy is bad news for gold, still meaning no inflation in sight and rate increase schedule (is) again confusing due to today's jobless claims," said George Gero, precious metals strategist for RBC Capital markets in New York.

"The precious metal could face higher volatility as we approach toward Friday's U.S. nonfarm payroll number," said Naeem Aslam, AvaTrade chief market analyst. "(But) we may actually see a weak number, which could push the dollar lower."

A weaker nonfarm jobs report could push back expectations for a U.S. interest rate hike, which some analysts predict could come as early as June.

Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could reduce demand for perceived safer assets such as gold.

Spot silver fell 1.2 percent to $16.68 an ounce, while platinum lost 0.7 percent to $1,150.50 an ounce and palladium rose 0.1 percent to $743 an ounce.

(Additional reporting by Manolo Serapio Jr in Singapore; Editing by Pravin Char, William Hardy and Dan Grebler)