Gold retreats on strong dollar after U.S. data

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON (Reuters) - Gold prices fell on Wednesday, heading for a third day of losses, as the dollar extended gains versus the euro after U.S. economic data.

Data on Wednesday showed U.S. private employers added 212,000 jobs in February, while January's private payrolls were revised upwards to 250,000.

Spot gold , higher initially, fell 0.3 percent to $1,199.80 an ounce by 2:47 p.m. EST (1947 GMT). The metal had fallen to a one-week low of $1,194.90 on Tuesday, dented by an 11-year high of the dollar and expectations of a U.S. interest rate hike.

U.S. gold for April delivery dropped $3.50 to settle at $1,200.90 an ounce.

"It is struggling to find the real direction and in the meantime it is reacting to the dollar and the U.S. data, which will continue to drive the market for now," Bernard Sin, senior vice president at MKS Finance.

The dollar hit its highest since September 2003 against a basket of leading currencies, bolstered by strong U.S. government bond yields this week. [FRX/]

A stronger U.S. currency makes dollar-denominated gold more expensive for holders of other currencies, while the rise in returns from U.S. bonds is negative for the metal, which pays no interest.

Spot gold traded well within the prior session's range.

"Inside days are usually an indication that the market's going to break out one way or the other," said Eli Tesfaye, senior market strategist for RJO Futures in Chicago.

"Right now we're pretty much technical. There's no fundamental moving this market."

The bullion market was likely to focus on the Labor Department's report on U.S. February nonfarm payrolls on Friday to gauge when the Federal Reserve might raise rates.

Expectations of robust U.S. economic data and higher U.S. interest rates, coupled with investor outflows from bullion funds, are seen as the biggest drawbacks for non-interest-bearing gold.

Holdings in SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.35 percent to 760.80 tonnes on Tuesday. That followed a near 8-tonne fall on Monday, the biggest outflow this year.

Traders were also keeping an eye on the euro, which has been subdued over the past few sessions ahead of a European Central Bank policy meeting on Thursday and the implementation of its government bond buying program due to start this month.

Spot silver fell 0.4 percent to $16.23 an ounce, while palladium was down 0.2 percent at $825 an ounce and platinum edged up 0.2 percent to $1,190 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy, Susan Thomas and Chizu Nomiyama)