* Gold hit after jobless claims, dollar rise
* Investors take profits ahead of Friday's payrolls report
* Outside day technical pattern seen bearish
* Coming up: U.S. nonfarm payrolls; Oct 8, 1230 GMT
(Recasts, updates prices to market close, new byline/dateline)
By Frank Tang
NEW YORK, Oct 7 (Reuters) - Gold retreated 2 percent from a
new record high on Thursday, as upbeat news on U.S. jobless
benefits shored up the dollar and prompted gold longs to secure
profits before Friday's U.S. employment report.
New U.S. claims for unemployment benefits, a precursor to
Friday's September Labor Department nonfarm payrolls report,
fell to a near three-month low last week, decreasing gold's
appeal as a safe-haven investment.
It took its cue from the dollar, which recovered against
the euro as investors tempered negativity on U.S. growth, and
speculated that Europe's common currency had risen too far, too
fast.
"People just want to take some profits off the table before
the nonfarm payrolls report. The gold market has been overdone,
and we have gone so far in such a short period of time, so a
correction is inevitable," said Bruce Dunn, vice president of
trading at Auramet Trading LLC.
But even as gold posted its biggest percentage loss since
late July, its price was set for the fourth straight week of
gains.
Thursday's relatively upbeat report did not change
perceptions the Federal Reserve will roll out a new asset
purchasing program as early next month to keep interest rates
low and support the economic recovery, a process known as
quantitative easing.
Such an injection of money would be aimed at preventing
nascent deflation by stimulating modest inflation, against
which gold is used as a hedge.
Spot gold fell 0.8 percent to $1,335.35 an ounce at 2:50
p.m. EDT (1850 GMT), and was off 2.1 percent from its new high
of $1,364.60 set early in the day as the euro rose to an
eight-month high above $1.40.
U.S. gold futures for December delivery settled down $12.70
at $1,335. Volume was about 255,500 lots, the highest since
late July and more than doubled its 30-day average, preliminary
Reuters data showed.
COMEX gold open interest climbed 4,737 contracts to a
record high 621,941 lots as of Wednesday, according to exchange
data.
The dollar is down 7 percent against a basket of currencies
in the last month, as the market prepares for the Fed to resume
quantitative easing now that the Bank of Japan announced its
own modest easing to cap the yen.
Gold, has gained as much as 10 percent in the same period,
with its inverse correlation with the dollar appearing to
strengthen.
"We look at the reasons for holding gold and other precious
metals and, above everything else, it is the idea of a store of
value to protect against currency debasement," said Natixis
strategist Nic Brown.
But there were market watchers who called for a correction
to the record-breaking rally, in which gold has gained about
$200 since late July.
Plus, the gold charts showed an outside-day on Thursday, a
price pattern in which the day's range exceeds the previous
high and low, and is considered a technical warning sign of a
reversal.
Meanwhile, recent gains against other currencies have been
less dramatic. In euros gold is up less than 1 percent this
month, compared to a 2.8 percent gain in dollar-priced gold,
while yen-priced and sterling-priced gold are both up more than
1 percent.
The jobless claims data mitigated growth pessimism from
Wednesday, when a survey of private-sector employment showed a
surprise contraction in September. So the picture is mixed
going into Friday's key employment report, due at 8:30 a.m. EDT
(1230 GMT).
"The short-term direction of the U.S. dollar, and therefore
gold, will be influenced by tomorrow's U.S. payrolls data: a
positive or negative deviation from expectations will weigh
heavily on market thinking about quantitative easing
prospects," UBS analyst Edel Tully wrote in a note.
Economists polled by Reuters are expected Friday's nonfarm
payrolls to be little changed.
Spot silver hit a new 30-year high at $23.51 an ounce but
was quoted at the end of the day down 2.2 percent at $22.62.
The platinum group metals were mixed. Spot platinum rose to
$1,725.50, its highest since mid-May and was trading down 0.1
percent on the day at $1,693, while palladium hit a new
nine-year peak at $602.50, and it gained 0.9 percent to
$584.00.
(Additional reporting by Amanda Cooper in London and Rujun
Shen in Singapore; Editing by Alden Bentley)
