Metals

Gold retreats on strong dollar after U.S. data

Getty Images

Gold fell on Wednesday, heading for a third day of losses, as the dollar extended gains versus the euro after U.S. economic data.

Data on Wednesday showed private employers added 212,000 jobs in February, while January's private payrolls were revised upwards to 250,000.

, higher initially, fell 0.1 percent to $1,201.30 an ounce by 1538 GMT. The metal had fallen to a one-week low of $1,194.90 on Tuesday, dented by an 11-year high of the dollar and expectations of a U.S. interest rate hike.

U.S. gold for April delivery dropped $3.90 to $1,200.40 an ounce.

"It feels like gold is going to test the $1,200 psychological level," Bernard Sin, senior vice president at MKS Finance.

"It is struggling to find the real direction and in the meantime it is reacting to the dollar and the U.S. data, which will continue to drive the market for now."

Randgold CEO: Gold industry broken
VIDEO7:0107:01
Randgold CEO: Gold industry broken

The dollar hit its highest since September 2003 against a basket of leading currencies, bolstered by strong U.S. government bond yields this week.

A stronger U.S. currency makes dollar-denominated gold more expensive for holders of other currencies, while the rise in returns from U.S. bonds is negative for the metal, which pays no interest.

Read MoreIs this a new snag for gold demand?

The bullion market was likely to focus on February nonfarm payrolls report on Friday to gauge when the Federal Reserve might raise rates.

Expectations of robust U.S. economic data and higher U.S. interest rates, coupled with investor outflows from bullion funds, are seen as the biggest drawbacks for non-interest-bearing gold.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.35 percent to 760.80 tonnes on Tuesday. That followed a near 8-tonne fall on Monday, the biggest outflow this year.

Traders were also keeping an eye on the euro, which has been subdued over the past few sessions ahead of a European Central Bank policy meeting on Thursday and the implementation of its government bond buying programme due to start this month.