Gold prices eased on Thursday as the dollar rallied after a report showed that the US economy created more private-sector jobs than expected in May, further strengthening expectations for an interest rate hike this month. US private employers added 253,000 jobs in May, above economists' expectations, a report by a payrolls processor showed on Thursday.
The ADP figures come ahead of the US Labour Department's more comprehensive non-farm payrolls report on Friday, which includes both public- and private-sector employment. Also weighing on gold was the firmer dollar index, which extended gains after the ADP data, already supported by higher US Treasury yields and solidifying expectations of a rise in US interest rates this month.
"Given that a June rate hike is a mortal lock, it seems unlikely that tomorrow's employment report will have a major impact on metals," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York. Spot gold was down 0.04 percent at $1,267.58 per ounce by 3:05 pm EDT (1905 GMT), having peaked the previous day at its strongest since April 25 at $1,273.74.
US gold futures fell 0.4 percent to settle at $1,270.1. Positive payroll data from the United States could mean the Fed will raise rates as expected at its June 13-14 meeting. Traders believe there is a 96 percent chance of a rate rise at the June policy meeting and a 50 percent chance of one more hike before the end of 2017, according to CME Group's FedWatch tool. Among other precious metals, silver fell 0.03 percent to $17.28 an ounce after sinking to the lowest in a week at $16.96. Palladium, which rose to the highest in a month earlier in the session, retreated to trade 1.07 percent higher at $825.75. Platinum shed 1.4 percent to $930.25 after sinking to a more than two-week low at $922.50.
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