By Clara Denina
LONDON (Reuters) - Gold edged lower on Thursday, as a rally in equity markets and increasing optimism over global economic growth dented its appeal as an alternative investment and made it vulnerable to further losses.
The metal, which had climbed early in the year on strong Chinese physical demand and a weak U.S. jobs report on Friday, gave up gains after a series of strong U.S. data.
Spot gold fell 0.2 percent to $1,238.50 an ounce by 1254 GMT. It touched a one-month peak of $1,255.00 on Tuesday.
U.S. gold futures for February delivery were unchanged at $1,238.20 an ounce.
"Gold rallied towards the $1,255 level but it failed to go through it because there is no investor interest, and there may be a push towards the $1,210/$1,200 area," MKS SA head of trading Afshin Nabavi said.
"I'm sure that with the current strength in the dollar and equities, any kind of macroeconomic data or event, including the FOMC meeting at the end of the month will be watched to see whether there can be a breakthrough the current range."
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The dollar steadied against a basket of currencies, as a set of robust U.S. data and upbeat earnings from Bank of America helped offset concerns of a growth slowdown following December's disappointing payroll numbers.
European equities hovered around multi-year peaks, while U.S. Treasury yields were around 2.9 percent.
As gold pays no interest, returns on U.S. bonds are closely monitored by traders.
Markets are closely watching data to gauge whether the U.S. Federal Reserve will have enough evidence of economic recovery to continue unwinding its bond-buying stimulus over 2014.
The Fed announced its first cut to the $85 billion in monthly bond purchases in December, citing an improving economy.
"The Fed is unlikely to change the QE3 tapering pace just yet," VTB Capital analyst Andrey Kryuchenkov said in a note.
"But market participants are still likely to be nervous over the FOMC's forward interest rate guidance and a change of pace later in the year, should the macro numbers remain bullish (and especially for the labour sector)."
The next meeting of the Fed's FOMC (Federal Open Market Committee) is on January 28-29, while the next major U.S. data figure is the U.S. weekly jobless claims report, scheduled for release at 1330 GMT.
Supporting investor appetite for riskier assets like equities, the Federal Reserve said in its Beige Book published late on Wednesday the U.S. economy continued to grow at a moderate pace from late November to the end of 2013, with some regions of the country expecting a pick-up in growth.
In other precious metals, silver fell 0.6 percent to $20.02 an ounce.
Spot platinum fell 0.4 percent to $1,419.49 an ounce, while palladium was unchanged at $737.75 an ounce.
Platinum failed to react to data showing European car sales posted their highest year-on-year gain in four years in December.
Platinum is used in catalytic converters to clean exhaust emissions, most heavily in vehicles powered by diesel, the predominant auto fuel in Europe.
(Additional reporting by A. Ananthalakshmi in Singapore; editing by Keiron Henderson)