Gold futures hit a 1-month low on Wednesday after the ADP employment report shattered estimates.
U.S. gold futures for April delivery fell $6.70 to settle at $1,209.40.
Spot gold fell 0.63 percent to $1,207.92, after touching its lowest since Feb. 1 at $1,206.05, putting it on track for its fifth straight session in the red.
Investors are awaiting February non-farm payrolls data on Friday as a barometer of the U.S. economy after Federal Reserve Chair Janet Yellen said last week that the central bank was poised to lift rates provided jobs and inflation data held up.
These comments were seen as cementing plans for an increase at the Fed's March 14-15 meeting.
"Non-farm payrolls ... will provide final confirmation of a rate hike next week and this could put more pressure on gold," Julius Baer commodities analyst Carsten Menke said Higher rates tend to put pressure on gold prices because they raise the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
Gold could dip below $1,200 before Friday's data, Menke said.
On the other hand, ETF Securities' Martin Arnold said he expected the backdrop of political risk in France and a lack of policy certainty in the U.S. to create support for gold prices as the interest rate increase was already priced in.
"And if the Fed doesn't follow up their tough talk with action then it's certainly a bullish environment for gold," Arnold said, referring to expectations of three rate hikes this year.
In other precious metals, silver fell by 1.33 percent to $17.25 per ounce, after earlier touching $17.23, its lowest since Feb. 6.