Gold dropped to a ten-month low on Thursday as investors cashed in the precious metal to cover steep losses in equities after a disappointing US private-sector job report.
Gold, a traditional safe haven, also failed to capitalise on tensions in the Korean Peninsula, where North Korea has moved what appears to be a mid-range Musudan missile to its east coast, according to South Korea's Yonhap news agency.
Gold fell as low as US$1,541.14 an ounce, its lowest since May, and stood at US$1,544.46 an ounce by 0315 GMT, down US$12.89. It rallied to a one-month peak in March on worries about fiscal stability in Europe, as politicians scrambled to clinch a bailout for Cyprus.
"The environment for gold is pretty bearish now. I think if gold tests the lower trend channel, it has the potential to drop to US$1,530 level," said Joyce Liu, an investment analyst at Phillip Futures in Singapore.
"As for North Korea, I think investors are seeing the threats more like a joke. They are not reacting as if North Korea is really going to launch a nuclear-loaded missile. Funds are moving out of gold because there's less need for safe haven."
US gold for June delivery fell US$9.10 an ounce to US$1,544.40, while other precious metals also dropped sharply.
Silver tumbled to its lowest level since July last year, platinum dropped to its lowest since late August, and thinly-traded palladium was at a two-week low.
Stocks fell in Asia on Thursday after weak data stoked concerns that a key American jobs report due later in the week will signal slowing US growth, while investors also nervously watched the developments in the Korean Peninsula.
US companies hired at the weakest pace in five months in March as recent strong demand for construction jobs evaporated, while growth in the vast services sector slowed, signs that the economic recovery could be hitting a soft patch.
Markets will be on tenterhooks until Friday's release of the broader government payrolls report for March that would give a fairer assessment of the US jobs market.
Signs of economic improvement could prompt the US Federal Reserve to halt its bullion-friendly bond-buying program earlier than expected.
Fears that central banks' money-printing to buy assets will stoke inflation have been a key driver in boosting gold, which rallied to an 11-month high in October last year after the Fed announced its third round of aggressive economic stimulus
"The gold price is, in our view, in bubble territory. Investors have pushed the gold price sharply higher over the past ten years with the past five-year rally driven by fears that aggressive central bank quantitative easing would lead to very high inflation," Societe Generale said in a report.
"But inflation has so far stayed low and now we are beginning to see the economic conditions that would justify an end to the Fed's QE, fiscal stabilisation that has passed its inflection point and a US dollar that has begun trending higher."