NEW YORK Gold prices held onto gains in late Wednesday trade as investors sought safer assets after a private U.S. jobs reading fell short of expectations.
The sluggish hiring pace by U.S. firms in May curbed speculation that the Federal Reserve may begin to taper its $85 billion monthly bond-buying program, part of a set of stimulus measures by the Fed known as quantitative easing, or QE.
QE helped push gold prices to record highs in 2011 by keeping interest rates at historic lows, pushing some investors to safer assets, providing easier access to the funds to do so, and at the same time stoking fears over inflation.
Spot gold was up 0.4 percent at $1,399.60 an ounce at 2:45 p.m. EDT (1845 GMT), having earlier touched a session low of $1,395.19. U.S. gold futures for August delivery were up $8.40 an ounce at $1,405.60, off a low of $1,395.10.
A report by payrolls processor ADP showed U.S. private employers added 135,000 jobs in May, short of expectations for a 165,000 increase.
"The ADP (data) is suggesting instead of job growth stepping up, it's actually stepping down as we move into the summer months," said Mark Zandi, chief economist at Moody's Analytics, which jointly developed the report.
"It's not like we're falling off a cliff, it just feels like we're throttling back a little bit."
The Fed has linked the health of the jobs market to the continuation of its ultra-loose monetary policy.
"As the unemployment rate has been explicitly tied into quantitative easing, there has been a direct correlation between the non-farm payrolls and what happens to the gold price," said
Mitsubishi analyst Jonathan Butler.
But the Fed's policy has come under review amid some signs of growing economic momentum and officials worry about the collateral effects on funding markets.
Kansas City Fed President Esther George said on Tuesday that slowing the pace of bond buying would not mean tightening U.S. monetary policy and would help wean financial markets off their dependence on cheap money from the central bank.
Late in the day, technical selling pushed COMEX gold temporarily into negative territory and brought spot prices down with it, but they quickly returned to positive levels.
2013 asset returns: link.reuters.com/dub25t
2013 commod returns: link.reuters.com/reb25t
Gold/platinum ratio: link.reuters.com/xez92s
CHINESE GOLD IMPORTS FROM HONG KONG FALL
China's total gold imports from Hong Kong fell to 125.715 tonnes in April from a record high of 223.519 tonnes in the previous month, despite a drop in prices to two-year lows during the month.
Elsewhere, India raised its import duty on gold by a third, to 8 percent, as the government of the world's biggest bullion buyer seeks to halt a surge in demand that threatens to widen a record current account deficit.
The increase was announced a day after the central bank acted to force domestic jewellers to buy only on a cash basis. The move is expected to slash imports, which hit 162 tonnes in May.
Among other precious metals, silver was up about 0.9 percent at $22.62 an ounce, spot platinum was up 1.44 percent at $1,509.50 an ounce, and spot palladium was up 0.87 percent at $754.97 an ounce.
Platinum extended its premium over gold to more than $100 on Wednesday, its highest since August 2011, as the white metal benefited from concerns about supply from South Africa, source of three-quarters of the world's platinum.
Prices at 2:38 p.m. EDT (1838 GMT)
(Additional reporting by Jan Harvey; Editing by James Jukwey, Elaine Hardcastle and Nick Zieminski)