By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold fell on Monday, reversing earlier gains to extend a 2-percent decline in the previous session, as stronger-than-expected U.S. jobs data fuelled uncertainty over the outlook for the Federal Reserve's stimulus programme.
The United States added more jobs in May than the month before, denting hopes for prolonged stimulus and weighing on gold's appeal as a hedge against inflation.
"The higher-than-expected reading now increases the likelihood that the Fed may start to pull back some of its stimulus earlier than expected," said INTL FCStone analyst Edward Meir.
Others said that job gains would need to be sustained before the U.S. central bank starts to consider tapering its bond-buying of $85 billion per month.
Victor Thianpiriya, commodities analyst at Australia and New Zealand Banking Group, said market participants expected the winding down to begin in the fourth quarter of this year or early next year.
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Spot gold had inched down 0.2 percent to $1,381.46 an ounce by 0616 GMT after its biggest one-day drop in over three weeks on Friday.
Philadelphia Fed President Charles Plosser said on Friday the jobs report showed that government spending cuts have so far not been as damaging as some feared and that the central bank should reduce its bond buying "now". However, he is in the minority of the Fed's 19 policymakers, with most appearing to still support bond-buying at current levels.
Earlier in the session, gold prices rose due to buying from China.
"China has been the only supporting factor for gold in Asia trading sessions recently," said ANZ's Thianpiriya.
Demand for gold in China, the second-biggest bullion buyer after India, has grown since prices touched a two-year low around $1,320 an ounce in April, with tight supply pushing premiums to record highs.
A better-performing stock market has attracted investors this year, sapping some appetite for gold. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.06 percent to 1,007.14 tonnes on Friday -- their lowest in four years.
(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)