By Frank Tang and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold fell around 2 percent on Friday, its biggest one-day drop in over three weeks, as funds dumped bullion after resilient U.S. jobs data suggested the Federal Reserve could begin to scale back its monetary stimulus later this year.
The metal posted its first weekly drop in two weeks after Friday's selloff more than erased gains earlier this week. A sharp dollar drop and strong physical demand had lifted gold above $1,400 an ounce for most of this week. For the week, bullion eased 0.3 percent.
The United States added 175,000 jobs last month after adding just 149,000 in April, reducing hopes of prolonged stimulus, and that weighed down on gold's inflation-hedge appeal.
"It's a knee-jerk reaction to the jobs data. Demand for gold is currently in the summer doldrums and the data provided an excuse to sell," said David McAlvany, CEO of McAlvany Financial, a unit of McAlvany Wealth, which has $475 million in assets under management.
Spot gold was down 2.1 percent at $1,383.96 an ounce by 2:28 p.m. EDT (1828 GMT), having hit a low of $1,377.29, the lowest since May 28.
U.S. Comex gold futures for August delivery settled down $32.80 an ounce at $1,383.00.
The nonfarm payrolls report also showed that U.S. unemployment rate ticked a tenth of a point higher to 7.6 percent, but only because more Americans began to hunt for jobs.
"The employment number is better than consensus, and it suggests that Fed bond buying will end sooner than later," said Phillip Streible, senior commodities trader at futures brokerage R.J. O'Brien.
Despite the sharp pullback in prices, trading volume was about 15 percent below its 30-day average, preliminary Reuters data showed.
Unusual, volatile trading in markets just ahead and after U.S. jobs data was released caused brief halts in stock and bond futures. It was not clear what sparked the volatility but this type of movement has happened in the past when traders tried to speculate on the outcome of data ahead of its release.
A CME Group spokesman said there was no trading halt in gold futures on Friday.
INDIA ACTS ON GOLD
Officials in the world's biggest bullion consumer, India, continued efforts to curb gold imports on Friday, with the Reserve Bank of India extending restrictions on loans against security of gold coins per customer to all co-operative banks.
This came after India announced another increase in its import duty for gold this week.
Silver was down 3.8 percent at $21.74 an ounce. Platinum slipped 1.6 percent to 1,502.49 an ounce, while palladium edged down 0.4 percent to $755.50 an ounce.
(Additional reporting by Clara Denina in London; Editing by Gunna Dickson and James Dalgleish)
