Gold eased on Wednesday, hovering above the recent 5-1/2 year low on earlier pressure from the dollar as U.S. services sector data revived expectations of a U.S. interest rate rise as early as September.
Spot prices had briefly rebounded after earlier U.S. data showed private sector hiring in July had risen the least since April, which initially weighed on the dollar.
But a stronger-than-forecast private report on the U.S. services sector in July pushed the dollar to a 2-month high and gold close to a late July low of $1,077, the weakest since February 2010. The greenback later returned lower, easing by 0.1 percent, but bullion prices remained down.
The next main data event is U.S. non-farm payrolls on Friday.
"The non-manufacturing ISM has outweighed the ADP number ... today has not changed the view that the Fed is on track to raise rates in September," Commerzbank analyst Daniel Briesemann said.
The prospect of the first U.S. rate rise in nearly a decade was backed up by Atlanta Federal Reserve President Dennis Lockhart on Tuesday, according to the Wall Street Journal.
This would increase the opportunity cost of holding the metal, an asset that does not earn interest. Bullion lost nearly seven percent in July.
On Wednesday, however, Fed Governor Jerome Powell said policymakers have not yet decided whether to raise interest rates next month.
"Statements about the likely date of the rate hike is having only a modest impact on gold prices probably because this must go down in history as the most telegraphed notice of a rate change to fully prepare the market in advance," said Ross Norman, chief executive of bullion brokerage Sharps Pixley.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped further on Tuesday to 21.56 million ounces, the lowest since September 2008.