Gold steadied on Thursday off the previous day's two-month low after weaker than expected private sector payrolls data fed into a more cautious view on the pace of U.S. interest rate hikes this year.
The metal remained hemmed into a narrow range, however, ahead of a key U.S. non-farm payrolls data on Friday. Investors are wary of betting that the Fed will hold off on tightening monetary policy after hiking interest rates earlier this year.
Spot gold slipped by 0.19 percent to $1,224.11 an ounce, little changed from $1,226.45 an ounce late on Wednesday, but off an earlier low of $1,222.06.
The dollar fell against the euro and yen on Thursday after data showed the U.S. private sector created fewer jobs than expected in June, raising concerns that the labour market is losing some momentum.
Ten-year Treasury yields pared gains after the data, but they remain at highly elevated levels.
"You have higher real yields in the United States, but a lower dollar, and these two are battling each other," ABN Amro analyst Georgette Boele said.
U.S. gold futures for August delivery settled at $1,223.30 per ounce.
Gold came under heavy pressure since European and Canadian policymakers indicated last week that they were considering a turn towards monetary tightening, boosting bond yields.
The metal tends to suffer when interest rates rise, increasing the opportunity cost of holding non-yielding bullion.
Minutes from the Federal Reserve's June meeting released on Wednesday, at which policymakers voted to raise interest rates, showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August, though others wanted to wait until later in the year.
"The Fed is worried about soft inflation readings... and that will stay their hand on lifting rates for now. So far, so gold friendly," Mitsubishi analyst Jonathan Butler said. "The sting in the tail for gold will be any future Fed announcement regarding scaling back reinvesting in maturing bonds."
"This could lead to a mini-'taper tantrum' in the fixed income market - less reinvestment should mean higher yields, which means a less favourable real rate environment for gold."
Among other precious metals, silver was down 0.22 percent to $16.01 an ounce, not far from Wednesday's six-month low of $15.84.
Platinum, which touched a two-month low on Wednesday at $896.25, was 0.08 percent lower at $909.30 an ounce, while palladium was down 0.54 percent at $835.50 an ounce.