* Short-covering rally fizzles out, market returns to data, Fed-watch
* Strong jobs data on Friday could see further sharp losses
* Incoming Barrick Chairman would consider hedging again
By Veronica Brown
LONDON, Dec 5 (Reuters) - Gold fell on Thursday as the previous day's short-covering rally stalled, with investor sentiment dogged by persistent speculation about the future of U.S. monetary stimulus.
Even though the European Central Bank and Bank of England are expected to continue holding off on any new policy action later on Thursday, markets are fixated on U.S. economic snapshots and what signal any data gives on when the Federal reserve might start curbing its bond-buying programme.
Bullion saw its strongest gains in over a month on Wednesday as investors proved over-extended on bets for prices to fall further. The technical backdrop was more dominant than strong U.S. private-sector hiring data and service industry growth in the run up to Friday's key non-farm payrolls.
Spot gold was last quoted at $1,234.80 per ounce, having earlier hit a session low of $1,229.69.
"The moves yesterday were a little bit extensive, especially considering that we are now faced with a better prospect for Fed tapering maybe to come already in December," Danske Bank analyst Christin Tuxen.
"This is something that the gold market should react to in the sense that this is going to be key in phasing out the era of very low interest rates in the U.S."
Analysts polled by Reuters estimate that around 180,000 jobs were added last month.
The bond-buying stimulus has strongly supported gold prices as it has served to keep interest rates ultra low, an ideal environment for non-yield bearing assets.
"Bullion remains at the mercy of US dollar sentiment and QE3 expectations," VTB said in a note to clients.
"Market participants are still expecting the dollar to remain strong with little chance for a revival in bullion sentiment in the near future without significant physical flows."
On the mining front, the incoming chairman of Barrick Gold Corp said on Wednesday he would consider a hedging strategy, given volatility in the price of gold, but this did not mean Barrick was poised to change tack on the issue.
"As an outsider, I always thought it made great sense to hedge, given the background I come from. I can't imagine why you wouldn't look at that seriously all the time," Thornton told reporters at Barrick's headquarters in Toronto.
Holdings in SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, fell 2.70 tonnes to 838.71 tonnes on Wednesday - their lowest since early 2009. GOL/ETF.
In other metals silver followed gold's lead, dropping 1 percent to $19.48 per ounce. Platinum lost 0.2 percent to $1,365, while palladium also shed 0.2 percent to $723 .