| NEW YORK
NEW YORK Gold edged up on Wednesday, defying a drop in crude oil and a firmer dollar as encouraging U.S. employment and service-sector data bolstered bullion's investment appeal as an inflation hedge.
The metal held slim gains even though Brent crude futures plunged more than 3 percent as disappointing economic reports from Europe and China stoked concerns about demand. <O/R>
Gold largely tracked Wall Street after the ADP National Employment report showed U.S. companies added more jobs than expected in September, while activity in the vast services sector picked up, suggesting the U.S. economy remained on track for modest growth.
The private-sector report did little to alter the view that the Federal Reserve will keep interest rates low until it sees signs of substantial economic progress. The Fed last month announced a third round of asset buybacks known as quantitative easing (QE3).
"Gold held up because QE3 is attracting new investors into the market. People are exiting risk currencies such as the Australian dollar and looking for a safe haven in the gold market," said Phillip Streible, senior commodities broker at futures brokerage R.J. O'Brien.
Also underpinning gold prices was simmering geopolitical tension in the Middle East. Turkey said it struck targets in Syria in response to a mortar attack that killed a woman and four children in southeastern Turkey.
Spot gold was up 0.1 percent at $1,776.18 an ounce by 2:47 p.m. EDT (1847 GMT). It hit $1,791.20 this week, its highest level since last November.
U.S. gold futures for December delivery settled up $4.20 at $1,779.80 an ounce, with trading volume 30 percent below its 250-day average, preliminary Reuters data showed.
ALL EYES ON U.S. PAYROLLS
Markets await the all-important September U.S. nonfarm payrolls data due on Friday. The figures are keenly watched for clues on how long the U.S. central bank will continue adding $40 billion a month to the financial system through purchases of mortgage-backed securities.
Friday's report will likely show U.S. job growth improved only slightly in September as businesses remained cautious out of fear a sharp tightening of the government's budget could deliver a big blow to the economic recovery early next year.
Credit Suisse analyst Tom Kendall said physical buyers would need to be back in droves to take gold above $1,800 an ounce, which is seen as the next upside target.
Among other precious metals, silver edged down 0.2 percent to $34.51 an ounce.
Platinum group metals were underpinned by worries about labor unrest gripping South Africa's platinum mining sector. Spot platinum rose 0.7 percent to $1,680.10 an ounce, while palladium increased 0.4 percent to $649.60 an ounce.
(Additional reporting by Rujun Shen in Singapore, Clare Hutchison, Amanda Cooper and Veronica Brown in London; Editing by John Wallace and Dale Hudson)