Gold fell on Friday to hit its lowest in a week, with stock markets climbing and the dollar firming after upbeat US private sector job figures appeared to boost the prospects for an interest rate hike this month.
Investors will be looking for further clues on the timing of rate rises in US non-farm payroll data due later in the day.
Spot gold had dropped 0.3 percent to $1,262.10 per ounce by 0738 GMT. It earlier touched its weakest since May 26 at $1,258.60. Gold has fallen 0.4 percent for the week and could register its first weekly decline in four weeks.
US gold futures fell 0.5 percent to $1,264.40 an ounce.
"A stronger dollar and firming US equity markets, along with weaker oil are all headwinds that could hamper gold's advance over the short-term," said INTL FCStone analyst Edward Meir.
"But on the flip side, the fact that prices have not dropped significantly so far suggests that funds continue to buy the dips."
US factory activity ticked up in May after slowing for two straight months and private employers stepped up hiring, suggesting the economy is regaining speed after struggling at the start of the year.
Federal funds futures implied traders saw a 96 percent chance the US central bank would increase key overnight borrowing costs by a quarter point, to 1.00-1.25 percent, at its June 13-14 policy meeting, CME Group's FedWatch program showed.
Fed Governor Jerome Powell said the US economy was "healthy" and the central bank should continue to edge towards a more normal footing after nearly a decade of crisis-era stimulus.
Higher interest rates put pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.
"We are bearish on gold short-term into the Fed hike. There is good room to fallback to $1,200 within the next three months," said Dominic Schnider at UBS Wealth Management in Hong Kong.
"The world economy is still in good shape, people are risk-on, inflation is leveling off, there is no real big inflation threat anymore, policy is normalizing still."
In the wider markets, global stocks hit a record high on Friday and Asian markets rose to their best levels in more than two years, while the dollar marked a one-week high against the yen.
Among other precious metals, palladium touched its strongest since May 1 at $828.90 earlier in the day. It has gained 4.6 pct this week and is on track for its best weekly performance since the week ended March 24.
Silver was down 0.7 pct for the week and platinum 2.6 percent. Both are heading for their first weekly decline in four.
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