Gold ended higher on Wednesday after mixed U.S. data left investors uncertain over the pace of recovery in the world's largest economy.
U.S. private employers added 175,000 workers in January, slightly fewer than the 180,000 increase forecast by analysts polled by Reuters. The December reading was downgraded to 227,000 from the originally reported 238,000.
Separately, financial data firm Markit said growth in the U.S. services sector quickened to a four-month high in January and hiring remained robust, while the U.S. services sector rebounded in January after two months of slower growth.
"A lower ADP employment number immediately translated into a fall in the dollar and a spike in gold," said Bernard Sin, an MKS SA senior vice president.
"But then we see that the economic reports are not uniformly negative, leaving gold investors still unconvinced that rallies can be sustained ... and we are back in a narrow range."
Spot gold rose as much as 1.5 percent to a session high of $1,273.26 an ounce after the U.S. ADP data before cutting gains. It was up 0.2 percent to $1,258 an ounce.
U.S. gold futures for April delivery rose settled $5.70 higher at $1,256.90 an ounce.
Chart: Precious Metals
The weaker-than-expected ADP data raised concerns that a U.S. nonfarm payrolls report for January, due on Friday, may disappoint. Nonfarm payrolls are widely seen as a barometer for the health of the U.S. economy.
The dollar was flat against a basket of currencies, having fallen 0.2 percent after the ADP data, while fragile confidence among investors lifted the yen as buyers sought safe-haven currencies.
(Read more: Prepare for a gold 'moonshot': Schiff)
European stocks inched up, snapping their steepest two-week pull-back in seven months, while U.S. shares opened lower as underlying worries about global growth and emerging market currencies kept buyers on edge.
Concerns about the fragility of stock markets after a recent heavy selloff has piqued some investment interest in gold, with the world's largest bullion-backed exchange-traded fund, the SPDR Gold Trust, reporting a 3.9-tonne inflow on Tuesday.
Physical demand was expected to remain weak while top buyer China was closed for the Lunar New Year holiday. Other parts of Asia were also subdued due to the gain in prices and weakness in regional currencies.
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