Gold languished near an eight-week low on Friday and was set to post its biggest weekly drop since July as investors positioned themselves for a possible US rate hike this year, pulling money out of bullion funds.
Market participants are now waiting for the US nonfarm payrolls report due later in the day for indications on the strength of the economy and how it would affect the Federal Reserve's monetary policy.
Spot gold had ticked up 0.4 percent to USD 1,107.60 an ounce by 0332 GMT, not far from USD 1,102.35 hit in the previous session, the lowest since Sept. 11. The metal has lost 3 percent for the week, the sharpest slide since the week ended July 24.
"Gold continues to trend lower with rising bets on a Fed rate hike in December. The recent trend looks entrenched with sentiment weakening in recent days," ANZ said in a note.
Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, tumbled to 671.77 tonnes, the lowest since mid-August. On Thursday alone, the fund saw outflows of 8.34 tonnes, the biggest daily drop since July 17.
Fed Chair Janet Yellen said on Wednesday that a rise in rates in December was a "live possibility" if justified by upcoming economic data.
The Fed in its October policy statement was deliberately trying to convince investors of a possible December interest rate hike, and was successful in doing so, Atlanta Fed President Dennis Lockhart said on Thursday.
Earlier, after the US central bank's September meeting, investors believed the Fed would delay the first US rate hike in nearly a decade to next year on global growth concerns.
Gold as a non-interest-paying asset could see demand take a hit from higher rates.
Solid payrolls data later in the session could seal the case for a December rate hike. According to a survey of economists, nonfarm payrolls probably increased 180,000, well above the 139,000 jobs per month average for August and September.
"The USD 1,100 handle is the key figure on the downside whilst a spike back above USD 1,110 could signal a technical turnaround or at least a consolidation," said MKS Group trader James Gardiner.
Among other precious metals, silver and platinum were headed for their third straight weekly declines.
With a 10-percent slide, palladium was on track for its worst week since September 2011, hurt by sharp outflows from exchange traded funds.
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