* Soft ADP data weighs on dollar, Treasury yields still up
* Gold hovers above prior session's two-month low
* GRAPHIC-2017 asset returns: http://tmsnrt.rs/2jvdmXl
(Recasts, updates prices; adds comment, second byline, NEW YORK dateline) NEW YORK/LONDON, July 6 (Reuters) - Gold eased but hovered above the previous session's two-month low on Thursday as weaker-than-expected private sector payrolls data fed into a more cautious view on the pace of U.S. interest rate hikes this year and Treasury yields firmed. The metal remained hemmed into a narrow range ahead of key U.S. non-farm payrolls data on Friday. Investors were wary of betting that the Federal Reserve will hold off on further monetary policy tightening after hiking interest rates earlier this year.
Spot gold was down 0.2 percent at $1,224.47 an ounce
on Wednesday, their weakest since May 10.
U.S. gold futures for August delivery settled up 0.1
percent at $1,223.30. The pace of growth in the U.S. economy's service sector accelerated in June, as stronger demand offset slower employment gains, according to the Institute for Supply Management.
Stocks around the world fell and the euro gained against the U.S. dollar after minutes from the European Central Bank's latest meeting showed it could be open to scrapping its bond-buying pledge.
Ten-year U.S. 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. Gold prices tend to fall when interest rates rise, increasing the opportunity cost of holding non-yielding bullion. "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."
Among other precious metals, silver was down 0.5
percent to $15.97 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 0.07 percent lower at $909.40 an ounce, while
palladium was down 0.5 percent at $835.50 an ounce.
(Additional reporting by Nithin Prasad and Vijaykumar Vedala in Bengaluru; Editing by Meredith Mazzilli)