Gold down 2 percent after strong U.S. nonfarm payrolls

Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh May 8, 2012.

NEW YORK (Reuters) - Gold slid 2 percent in heavy trade on Friday, breaking below $1,690 an ounce for the first time in about two months as an encouraging U.S. nonfarm payrolls report lowered expectations for economic stimulus provided by global central banks.

Bullion hit a two-month low on Friday and is down almost 2 percent this week for its fourth consecutive weekly decline. The metal has now erased all its gains after the U.S. Federal Reserve announced its latest bond-buybacks to boost the job market in September.

Gold's pullback brought its price near major technical support near its 100- and 200-day moving averages, after data showed U.S. employers added 171,000 jobs in October, a hopeful sign for a lackluster economy that has been a drag on President Barack Obama's re-election chances.

"Better-than-expected numbers reduced the risk demand for gold, and a drop below $1,700 an ounce triggered sell-stops and momentum selling," said James Steel, metals analyst at HSBC.

"There are also long liquidation ahead of elections triggered by the job number," Steel said.

Spot gold fell 2 percent to $1,680.04 by 12:31 p.m. EDT (1631 GMT), having touched an eight-week low of $1,679.04.

U.S. COMEX gold futures for December delivery dropped $34.30 an ounce to $1,681.10, as trading volume on track to finish sharply above its 250-day average, preliminary Reuters data showed.

On charts, Friday's sharp pullback sent prices below a key Fibonacci retracement support and near its 100-day moving average, a level it has held since mid-August.

"Gold has weakened markedly after slicing below its 50 DMA line last week which was support and has now become resistance," said Adam Sarhan, CEO of Sarhan Capital.

Silver, which tends to be more volatile than gold, tumbled 3.5 percent to $31.09 an ounce.

EASING EXPECTATIONS TRIMMED

In the longer term, a positive reading on jobs and Friday's strong U.S. factory orders data could weigh on gold if it trims expectations for monetary easing.

The U.S. authorities have explicitly tied the extent of monetary stimulus measures - news of which sent gold above $1,795 an ounce in October - to the health of the jobs market.

However, while the data was good, analysts say it is far from a level that would yet stoke fears of an imminent reversal of the Fed's commitment to easing.

Despite Friday's broad sell-off, platinum and palladium were both heading for their first weekly gains after three weeks of straight falls.

Platinum dropped 1.3 percent to $1,544.24 and palladium fell 1.9 percent to $599.50.

(Editing by Alison Birrane; Editing by Jason Neely and Marguerita Choy)