Gold prices extended their recovery from four-week lows below US$4,300 during Thursday's Asian session, with buyers targeting near-term resistance around the $4,450 level.
By 4:35 pm AEST (6:35 am GMT), spot gold was up 0.9% at US$4,425.64 an ounce.
The U.S. dollar came under renewed selling pressure as Asian traders reacted to Wednesday's weaker-than-expected ADP employment report.
ADP reported that U.S. private-sector employment increased by 38,000 jobs in August, following an upwardly revised gain of 46,000 in July. The result fell short of the forecast for a 47,000 increase.
Following the data, markets slightly reduced expectations for a U.S. Federal Reserve interest-rate hike in September to about 60.2%, from 67.2% before the ADP release, according to the CME Group FedWatch Tool.
The continued decline in USD/JPY, amid speculation that Japanese authorities could intervene to support the yen, also weighed on the U.S. dollar and supported gold.
The Japanese yen has also benefited from a more hawkish outlook for Bank of Japan monetary policy, putting further pressure on USD/JPY.
Markets are now pricing in a near-certain BoJ rate hike this month.
Traders will now turn their attention to Friday's U.S. non-farm payrolls report, which could determine whether gold extends its recovery or comes under renewed selling pressure.
Headline non-farm payrolls are expected to rebound by 58,000 in August following an unexpected decline of 23,000 in July, while the unemployment rate is forecast to remain at 4.1%.
