LONDON, Sept 1: Silver attracted selling in Europe on Friday that knocked the metal away from a three-month high, while gold drifted lower awaiting US data later in the day.

Spot silver matched on Thursday's peak of $12.89 an ounce, its firmest since May, but retreated to $12.78/12.85. That was also down on its late New York level of $12.83/12.90.

Strong investor demand for the white metal has nevertheless propelled prices higher by more than a third since the middle of June. Overnight news of a drop in output in world number 2 silver producer Mexico was also supportive .

People think silver is cheap and news of production drops in Mexico also gives them an excuse to buy, said a dealer in Hong Kong. But I don't see any physical buying in Asia, he said, referring to purchases from jewellers and the electronics sector.

That was backed up by traders in Europe who also reported selling coming in.

We saw a pick up in silver demand at the lows earlier this week, but today we're seeing selling and sell orders coming in from the physical market, one said.

But silver has clearly outperformed gold in the past month, gaining 14 per cent versus a drop of 1.6 per cent in bullion.

Spot gold fell to $623.60/624.60 an ounce from $625.20/626.20 late in New York.

Prices have failed several times to make headway above the upper $620s level, although dollar and geopolitical uncertainty were likely to prevent aggressive selling. The US market will be closed on Monday for the Labour Day public holiday.

Gold, like other financial markets, is awaiting payrolls data from the US that could shed light on the interest rate outlook.

The August report is due at 1230 GMT and expected to show employers added 120,000 jobs on the month, suggesting modest but steady growth that would likely make the Federal Reserve comfortable leaving rates on hold.

It is possible that a good number spurs a knee-jerk dollar rally, which may weaken gold, James Steel, metals analyst at HSBC, said in a daily report. Recent longs also may take profits or book square before the long weekend.

Platinum rose to $1,242/1,247 from $1,239/1,244, while palladium rose to $343/348 versus New York's previous $341.50/346.50.

—Reuters