Gold down 2.7% in worst fall since Dec 2013 on US jobs data

The dollar hit an 11-1/2 year high against a basket of major currencies, gaining more than 1 percent after US jobs data and bolstered by bolstered by strong US government bond yields.

A stronger US currency makes dollar-denominated gold more expensive for holders of other currencies, while the rise in returns from US bonds is negative for the metal, which pays no interest.

"The outcome was stronger than the forecast, there is a strong argument to increase rates, we can see that one with a stronger dollar and with the selloff in precious," Societe Generale analyst Robin Bhar said.

"If we close below January levels, then the most obvious downside would be November's lows of USD 1,131, obviously there would be big figure support around USD 1,150."

Markets believe that the strong report could prompt the Fed to soon increase US interest rates, a move that would further boost the dollar, in turn hurting demand for non-interest-bearing assets such as gold.

"We continue to forecast a further strengthening of the US dollar which will keep gold under pressure," Deutsche Bank said in a note.

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On the physical market, prices on the Shanghai Gold Exchange suggested physical demand for gold in China, the second biggest bullion consumer, remained at healthy levels.

Chinese gold prices were about USD 4-USD 5 an ounce higher than the global benchmark.

Sustained interest for physical bullion typically gives support to prices, cushioning any downside pressure.