Gold falls, U.S. data feeds worry Fed could curb stimulus

An employee holds a gold piece, each weighing 100 grams, at the state-owned mining company PT Antam Tbk metal refinery in Jakarta July 13, 2012.

NEW YORK (Reuters) - Gold fell nearly 1 percent on Friday, its biggest daily drop in more than two months, as improving U.S. consumer sentiment and jobs data stirred concern the Federal Reserve might curb the monetary stimulus that has boosted gold prices.

For the week, gold fell 1.5 percent, its largest weekly loss since the last week of June.

"We are starting to see some improvement in the U.S. economy, so the duration of a quantitative easing plan may not be as long as what was initially anticipated," said Phillip Streible, senior commodities broker at futures brokerage R.J. O'Brien.

"People who buy gold as an inflation play are starting to step out of the market," Streible said.

Bullion fell after data showed U.S. consumer sentiment unexpectedly rose to a five-year high. On Thursday, weekly U.S. jobless claims showed a surprise drop, more evidence of a stronger labor market after the unemployment rate fell to a four-year low of 7.8 percent last week.

Some analysts expected gold to rebound because of euro zone debt worries and economic uncertainty amid prospects of a U.S. "fiscal cliff" of automatic spending cuts and tax increases scheduled for January. That scenario could shock the economy and lead to more money printing from the Fed.

Spot gold fell 0.8 percent to $1,754.10 an ounce by 3:11 p.m. EDT (1911 GMT). The metal has now ended lower in five of its last six sessions.

U.S. COMEX gold futures for December delivery settled down $10.90 at $1,759.70, with trading volume at 40 percent lower than its 30-day average, preliminary Reuters data showed.

Silver was down 1.4 percent at $33.52, heading for a weekly loss of more than 2 percent.

Bullion posted four straight monthly increases prior to October. Gold jumped to an 11-month high last Friday, but failed to rise above $1,800 an ounce, triggering technical weakness.

PHYSICAL BUYING SLOWS

In top gold consumer India, dealers said that physical bullion demand was weak as a soft rupee has pushed up local gold prices.

Holdings of gold-backed exchange-traded funds also fell for the first time in two weeks on Thursday, but were still close to a record high.

Platinum group metals fell in the absence of fresh news from South Africa, where industrial unrest has shuttered the operations of major platinum miners including Anglo American Platinum (AMSJ.J), the world's largest producer of the metal.

Spot platinum was 1.6 percent lower at $1,647.20 an ounce, while palladium fell 2.8 percent to $633 an ounce.

(Additional reporting by Clare Hutchison in London and Rujun Shen in Singapore; editing by Jim Marshall)