Still, they noted, gold may see another wave of commodity-fund selling pressure over the coming days before finding support, analysts said.
The nearby-month gold contract on Comex dropped $3.70 to $426.10 an ounce on Friday on aggressive commodity-fund selling spurred by the much better-than-expected U.S. payrolls data and the subsequent charge higher in the dollar.
Concurrent selling of the euro ahead of the May 29 vote in France over the European Union constitution and growing concerns over weakness in the euro-zone economy also weighed on gold as currency investors ratcheted up their views on the dollar relative to other currencies.
"The weakness in the euro really played a major role in the gold selloff. The U.S. jobs report was excellent and as things are not looking so good in Europe, the dollar really got a boost and gold took a big hit," noted Jim Steel, director of futures research at major futures brokerage outfit Refco LLC.
He argued that should the dollar gain further, the current stream of funds selling previously bought gold contracts could be extended.
However, strong physical demand out of the Mideast and Asia should emerge in the $420 per ounce region to stem the tide and offer a floor for prices.
A dealer with a large New York-based European investment bank agreed, saying the U.S. economy looks better than Europe's, which helps the dollar. Furthermore, he added, not only do the commodity funds take this position, but so do gold producers who are also selling, believing the dollar doesn't look so bad going forward.
However, consumers of gold have grown accustomed to gold prices holding above well above the $420 region and could view any dips toward that region as a buying opportunity.
In other commodity markets:
CRUDE OIL: Futures on the Nymex ended a volatile session with modest gains. After a week of speculation about the significance of the $50 a barrel level and choppy ups and downs, analysts could agree only that the market has yet to pick a direction. June crude rose 13 cents to $50.96.
SOYBEANS: Prices at the Chicago Board of Trade soybeans rose to a 1½-week high after most- active July uncovered buying at important technical chart points and on strength in the physical market. July soybeans gained 11.25 cents to $6.40 a bushel.