Gold reverses losses after US data hurts dollar

However, US gold for delivery in December was down 0.1% at $1,089.00 an ounce

Gold reversed early losses on Wednesday as the dollar retreated from a 3-1/2 month high after U.S. jobs data came in below expectations, but prices still hovered around a 5-1/2-year low.

U.S. private employers hired 185,000 workers in July, the smallest increase since April, according to a payrolls processor on Wednesday, reducing expectations of a strong jobs reading in the government's payrolls report due on Friday.

Spot gold was up 0.3 percent at $1,090.61 an ounce by 1229 GMT. Prices remained however below $1,100, an important support breached in a late July rout that pulled it as low as $1,077, its weakest since February 2010.

U.S. gold for delivery in December was still down 0.1 percent at $1,089.00 an ounce.
 

Gold benefited from a retreat in the dollar, down 0.1 percent against a basket of major currencies. The next main data event is U.S. non-farm payrolls on Friday.

Comments from a Federal Reserve official on Tuesday adding weight to the likelihood of a U.S. interest rate rise as early as next month weighed on bullion in early trade.

Analysts remain cautious on gold on the prospect of the first U.S. rate rise in nearly a decade. This would increase the opportunity cost of holding the metal, an asset that does not earn interest. It lost nearly seven percent in July.

"The five pillars that used to bolster the price of gold are now eroding: central bank demand has weakened, Indian consumption has also been weaker since 2013, U.S. quantitative easing has ended, exchange-traded funds have become a source of supply because investors are selling and Chinese demand is not as strong as it used to be," Natixis analyst Bernard Dahdah said.

Platinum and palladium wallowed near multi-year lows on a global supply glut and prospects of sluggish demand from the automotive sector.

Spot platinum fell 0.3 percent to $948.24 an ounce, close to $940.50 on Tuesday, its lowest since February 2009. Palladium was up 0.5 percent at $595.75, after hitting a near three-year low of $586.33 in the previous session.

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.

Silver was unchanged at $14.57 an ounce.