Gold prices settled nearly flat on Wednesday. Earlier, prices rose after U.S. jobs data missed expectations, curbing speculation the Federal Reserve may start paring back its $85 billion monthly bond-buying program.
The bond purchases are part of a package of Fed stimulus measures known as quantitative easing, which have helped push gold prices to record highs in recent years by keeping interest rates at rock bottom and stoking fears over inflation.
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A report by payrolls processor ADP showed U.S. private employers added 135,000 jobs in May, falling short of economists' expectations. The data is seen as an important precursor to Friday's monthly non-farm payrolls report.
Mitsubishi analyst Jonathan Butler said the jobs data was being closely watched by gold traders.
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"As the unemployment rate has been explicitly tied into quantitative easing, there has been a direct correlation between the non-farm payrolls and what happens to the gold price," he said.
Hawkish comments from Fed members of late have fuelled speculation that the bank may start to rein in its bond-buying program.
Kansas City Fed President Esther George said on Tuesday slowing the pace of bond buying would not mean tightening U.S. monetary policy and would help wean financial markets off their dependence on cheap money from the central bank.
European shares and U.S. stock futures stayed lower after the ADP numbers, while the dollar extended losses against the yen.
Chinese Gold Imports From Hong Kong Fall
China's total gold imports from Hong Kong fell to 125.715 tonnes in April from a record high of 223.519 tonnes in the previous month, data showed on Wednesday, despite a drop in prices of the metal to two-year lows during the month.
Gold stayed under pressure on concerns that demand from number one buyer India will be hurt by fresh moves by the Reserve Bank of India to curb gold imports.
"Various comments from officials hint at the potential for more measures to come, as the government is taking a hard line trying to curb the country's appetite for gold," UBS said in a note. "This poses a risk for Indian gold demand up ahead should more and more restrictions be implemented."