Gold edged down on Wednesday, as the impact of higher U.S. real yields counteracted the effects of a weaker dollar, soft U.S. data and doubts that the Federal Reserve will raise interest rates at its June meeting.
Spot gold was down 0.2 percent at $1,190 an ounce, while U.S. gold futures for June delivery settled down $2.90 at $1,190.30 an ounce.
Gold, which pays no interest, was under pressure from a two-month high in the benchmark 10-year U.S. Treasury yield.
``U.S. real yields, which correlate the most to the gold price, have risen,'' Macquarie analyst Matthew Turner said. ``That's what's driving gold prices,'' he said, adding that he expected the Fed to raise rates earlier than the market currently anticipates.
The dollar fell 0.9 percent against a basket of currencies, after data showed U.S. private employers added 169,000 jobs last month, the fewest since January 2014 and 40,000 short of expectations.
The sluggish jobs report added to the view that the Federal Reserve will not raise interest rates at a policy meeting in June, a factor that could boost demand for bullion.
``A weaker dollar is obviously a supportive factor,'' Danske Bank senior analyst Jens Pedersen said.
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``The uncertain factor for gold is whether there will be more dollar strength on the back of a rate hike by the Federal Reserve, which we see happening in September.''
Fed officials have given conflicting signals this week on the possible timing of any rate increase, providing no clarity on the issue.
Investors are now awaiting Friday's U.S. nonfarm payrolls report, which will give a better read of the world's largest economy and clues on the timing of a rate hike.
In a sign the world's second-biggest bullion consumer was moving closer to creating a benchmark price, China conducted trial runs for the planned launch of a yuan-denominated gold fix last month, three sources familiar with the matter said.