Spot gold fell 2.5% to $1,759.90 per ounce by 12:37 p.m. EDT (1637 GMT), after touching its lowest since June 30 at $1,757.70. U.S. gold futures shed 2.6% to $1,762.00.
The U.S. nonfarm payrolls (NFP) report exceeded expectations with a 943,000 addition in jobs last month.
"The job numbers are hitting gold because they blew away expectations, so the market is anticipating that the Fed's taper date could be brought forward with an announcement in September and the actual tapering in early January most likely," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
Speculation about the central bank cutting back on its stimulus programme has been brewing in recent days.
Higher interest rates raise the opportunity cost of holding non-interest bearing gold.
Edward Moya, senior market analyst at OANDA, also said that a majority of the job gains in the report were from lower wage leisure and hospitality sectors which is not inflationary, denting gold's appeal as a hedge against rising prices.
Gold could fall towards $1,700 in the near term, however "we're still going to see tremendous amount of support getting pumped into the global economy, and that still should support gold," Moya said.
The dollar and benchmark 10-year Treasury yields jumped after the data, denting non-yielding gold's appeal. [USD/]
"We've already seen peak GDP, peak corporate earnings and economic data is going to be mixed at best going forward, so gold is still pretty good value," potentially limiting its downside, Blue Line's Streible added.
Caught in gold's slipstream, silver slipped 3.5% to $24.25 an ounce, while platinum dropped 2.6% to $978.77 and was set for its worst week since June. Palladium, fell 0.5% to $2,636.24.
(Reporting by Nakul Iyer and Arpan Varghese in Bengaluru; Editing by Kirsten Donovan and Marguerita Choy)
By Nakul Iyer
