NEW YORK/LONDON - Gold fell on Wednesday as weak physical demand and losses in equities and other commodities following disappointing U.S. private-sector jobs data extended the precious metal's decline to a second day.

Photo: Corbis

The metal, which for most of the year has tracked the performance of riskier assets, came under pressure after the ADP employment report showed U.S. companies hired the fewest people in seven months in April, adding to concerns that the economy has lost some momentum.

Market watchers said the ADP data, however, was not enough to alter a view that a strong run of U.S. economic indicators have smashed hopes of further quantitative easing, or government bond purchases, by the Federal Reserve.

The gold market is looking to Friday's April nonfarm payrolls data for the latest clue about whether the U.S. central bank will continue to keep interest rates near zero for the next several years and to use stimulus to boost economic growth.

"Unless we get a truly dismal number on Friday, the payrolls data will not radically push the market higher going forward based on QE," said Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC.

Spot gold was down 0.5 percent at $1,653.90 an ounce by 2:51 PM (1851 GMT).

U.S. gold futures for June delivery settled down $8.40 an ounce at $1,654. Trading volume was about 20 percent below its 30-day average, preliminary Reuters data showed.

Technical analysts said gold must breach its 100-day moving average key resistance near $1,670 an ounce to extend gains. The metal briefly rose above that level on Tuesday but was currently trading about $15 below it.

PHYSICAL DEMAND SOFT

Gold prices have been held in check in the last month by a dearth of physical demand, with buyers in key jewelry consumer India deterred by high prices and a weak rupee. Other factors include exchange-traded funds reporting outflows and coin sales easing.

Some appetite returned for gold coins in May, with the U.S. Mint reporting sales of 10,000 ounces on the first day of the month, half the total sold in the whole of April. April was its worst month for gold coin sales since June 2008.

Holdings of gold-backed, exchange-traded funds monitored by Reuters, which issue securities backed by physical gold and proved a popular investment during the financial crisis, fell by 194,000 ounces in April and edged below 70 million ounces on Tuesday for the first time since February 2.

Among other precious metals, silver was down 1.1 percent at $30.61 an ounce.

Platinum group metals fell a day after U.S. auto sales on average rose 2.3 percent in April. PGM investors now await a platinum and palladium industry survey by precious metals consultant Thomson Reuters GFMS on Thursday.

Spot platinum was down 0.5 percent for the day at $1,558.69 an ounce, while palladium dropped 1.4 percent to $666.92.