By Veronica Brown
LONDON (Reuters) - Gold dropped more than 1.6 percent on Thursday as investor sentiment was dogged by persistent speculation about the future of U.S. monetary stimulus.
Even while the European Central Bank and Bank of England held off from any new policy action, markets were fixated on U.S. economic snapshots and what signal any data gives on when the Federal Reserve might start trimming its bond-buying programme.
Data released on Thursday showed the U.S. economy grew faster than initially estimated in the third quarter and that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, a sign of recovery in the labour market.
Spot gold was last quoted at $1,222.80 per ounce, down 1.6 percent on the day, having earlier hit a session low of $1,220.74.
"I think what's really hurting gold is that when the Fed minutes for the October meeting came out, they seemed to say that they would be tapering QE (quantitative easing) even if the data only remained adequate. It didn't need to strengthen massively," Macquarie analyst Matt Turner said.
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"So in a sense there's a bias to the non-farm payrolls. If it's good, it's tapering, and if it's adequate, it's tapering. Our view is that it will happen by March next year. The minutes suggest that's the latest it will happen."
Bullion posted its strongest gains in over a month on Wednesday as investors proved over-extended on bets for prices to fall further. The technical backdrop was more dominant than strong U.S. private-sector hiring data and service industry growth in the run-up to Friday's non-farm payrolls.
"The moves yesterday were a little bit extensive, especially considering that we are now faced with a better prospect for Fed tapering maybe to come already in December," Danske Bank analyst Christin Tuxen said.
Analysts polled by Reuters estimate that around 180,000 jobs were added last month.
The bond-buying stimulus has been a strong support for gold prices as it has served to keep interest rates low, an ideal environment for non-yield-bearing assets.
On the mining front, the incoming chairman of Barrick Gold Corp said he would consider a hedging strategy, given the volatility in the price of gold, but this did not mean Barrick was poised to change tack on the issue.
"As an outsider, I always thought it made great sense to hedge, given the background I come from. I can't imagine why you wouldn't look at that seriously all the time," Thornton told reporters at Barrick's headquarters in Toronto.
Holdings in SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, fell 2.70 tonnes to 838.71 tonnes on Wednesday, their lowest since early 2009.
In other metals, silver followed gold's lead, dropping almost 2 percent to $19.29 per ounce. Platinum lost 0.8 percent to $1,357, while palladium shed 0.3 percent to $726.72.
(Additional reporting by A.Ananthalakshmi in Singapore; editing by David Evans and Jane Baird)