Gold futures for April delivery closed down $19.00, or 1.1 percent, at $1,740.30 an ounce. Trade ranged from $1,735.50 to $1,765.90.

Total US non-farm payroll employment rose by 243,000 in January, while the unemployment rate decreased to 8.3 percent from 8.5 percent. This shattered expectations of a 150,000 gain and an 8.5 percent rate.

Private sector employment grew by 257,000, with the largest employment gains in professional and business services, leisure and hospitality, and manufacturing.

This is certainly good news for the economy but it does materially reduce the chances that the Fed will launch a third round of quantitative easing (QE3) in the first quarter. Monetary accommodation is seen as unequivocally bullish for gold as extra liquidity tends to debase the dollar and creates future inflationary risk.

“Gold has been very solid for the last two-and-a-half months so we've been well overdue for a bout of profit-taking. [Also,] today's jobs report douses any QE3 expectations, at least momentarily,” Sterling Smith, an analyst with Country Hedging, said.

In other US data, factory orders rose 1.1 percent in December against an expected 1.5 percent and lower than the 2.2 percent gain the previous month.

In the wider markets, the euro was essentially flat against the dollar, while the Dow Jones industrial average and S&P 500 were sharply higher, up 1.22 percent and 1.36 percent respectively.

London-based broker Triland Metals noted that today's price retreat was a healthy correction in an otherwise buoyant market but did note that there were some “strange fluctuations” between the high and low prior to release of the non-farm payroll data.

Elsewhere, the debt crisis that has plagued Europe for months continues to create headwinds for the metals complex. The Greek government is struggling to gain political support to push forward the austerity measures needed to secure an additional 130 billion euros in international aid. Also, a final deal on the country's debt restructuring with the private sector has yet to be reached.

“We had rumours that a Greek settlement was imminent earlier in the week but the Greek prime minister this morning basically said that he never promised a deal. So we're right back where we started. The can keeps rolling down the road,” Smith said.

As for the other precious metals, Comex silver for March delivery closed down 42.6 cents at $33.749 an ounce. Trade ranged from $33.310 to $34.390.

Platinum futures for April delivery closed up $2.00 at $1,631.90 an ounce, while the March palladium contract ended at $708.85, up $1.20.

By: Tom Jennemann / Fri, Feb 03 2012, 20:51 GMT | Fastmarkets