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Gold prices slipped on Thursday as the dollar firmed and equities rose ahead of economic data that should bolster expectations of a U.S. interest rate hike.

Friday's U.S. non-farm payrolls report is expected to show 175,000 jobs were added last month, according to the median estimate of 100 economists polled by Reuters. Weekly jobless claims data is also due, on Thursday.

"A surprise on the upside (of the labour numbers) will make market watchers expect an even higher probability of a rate hike and that could bring gold prices down," said OCBC Bank analyst Barnabas Gan. "I would advise to buy on dips for gold simply because the fall in gold prices is very much driven by very short-term factors: like a higher probability of a Fed rate hike and higher oil prices," Gan said, who has kept his year-end forecast of $1,350 an ounce.

The dollar index, which tracks the currency against a basket of major peers, was up 0.2 percent at 96.267.

"The selloff in gold may not have ended yet," HSBC analyst James Steel said in a note. "$1,250 an ounce may be the next level gold can fall to, especially if the market adjusts expectations higher regarding the employment number to be released this Friday."

Deutsche Bank Strategist Says the Gold Crash Is Just Getting Started

Bullion tumbled 3.3 percent on Tuesday, the most since July 2015, breaching below $1,300 an ounce for the first time since June. But this could be a prelude to a bigger sell-off, according to Deutsche Bank AG Chief Global Strategist Binky Chadha.

"The way we think about it is, gold looks to be 20 to 25 percent overvalued," Chadha said in an interview with Bloomberg TV on Tuesday. "Positioning is very, very long." When he analyzed how gold is valued relative to the U.S. dollar and global growth, he found that the asset stood out in the entire oil and commodity complex.

The metal "did extremely well in the first quarter and that's when gold got very overvalued and was really part and parcel of the global growth of your trade. But unlike everything else, that actually got unwound," he said.

Investors Covet Gold Miners Once More in Search for Yield

Investors in exchange-traded funds that track gold producers are keeping the faith, even as the metal’s rally shows signs of fading.

On Tuesday, as gold sustained the biggest loss in almost three years, investors still poured into exchange-traded funds backed by the metal. About $350 million went into the VanEck Vectors Gold Miners ETF, the third-largest daily investment this year. The fund, the biggest ETF tracking bullion producers, is forecast to boost its dividend by half to 17.4 cents a share in 2016, according to data compiled by Bloomberg.

The ETF demand comes after miners cut costs, lowered debt and boosted their productivity to survive three years of falling gold prices. Now, with better balance sheets, producers including Newmont Mining Corp. are a good bet for improved returns going forward, according to Credit Suisse Group AG and Goldman Sachs Group Inc. That’s key at a time when the average earnings of S&P 500 companies is falling.

Reference: Bloomberg, Reuters