* U.S. private sector adds more jobs than expected in May
* Palladium hits one-month high before retreating
(Updates prices, adds comments, milestones, NEW YORK dateline)
By Devika Krishna Kumar and Eric Onstad
NEW YORK/LONDON, June 1 (Reuters) - Gold prices eased on
Thursday as the dollar rallied after a report showed that the
U.S. economy created more private-sector jobs than expected in
May, further strengthening expectations for an interest rate
hike this month.
U.S. private employers added 253,000 jobs in May, above
economists' expectations, a report by a payrolls processor
showed on Thursday.
The ADP figures come ahead of the U.S. Labor Department's
more comprehensive non-farm payrolls report on Friday, which
includes both public- and private-sector employment.
Also weighing on gold was the firmer dollar index ,
which extended gains after the ADP data, already supported by
higher U.S. Treasury yields and solidifying expectations of a
rise in U.S. interest rates this month.
"Given that a June rate hike is a mortal lock, it seems
unlikely that tomorrow's employment report will have a major
impact on metals," said Tai Wong, director of base and precious
metals trading for BMO Capital Markets in New York.
"The headline number is a volatile series and more attention
will be paid on earnings as an indicator of future inflation,
which could impact the chances of another hike later in the
year."
Spot gold was down 0.04 percent at $1,267.58 per
ounce by 3:05 p.m. EDT (1905 GMT), having peaked the previous
day at its strongest since April 25 at $1,273.74.
U.S. gold futures fell 0.4 percent to settle at
$1,270.1.
Positive payroll data from the United States could mean the
Fed will raise rates as expected at its June 13-14 meeting.
Traders believe there is a 96 percent chance of a rate rise at
the June policy meeting and a 50 percent chance of one more hike
before the end of 2017, according to CME Group's FedWatch tool.
Demand for American Eagle gold coins remains lacklustre,
data from the U.S. Mint showed, with sales for the first five
months of the year tumbling 56 percent from the same period last
year to 186,500 ounces.
Inflows into gold have also eased.
"While prices have gyrated around our price forecasts for
much of the quarter, ETF flows have calmed notably – especially
when viewed on a monthly basis," RBC Capital Markets said in a
note.
"Overall, we expect ETF holdings to continue trend with
prices, which given our relatively neutral view on a quarterly
average basis means that holdings will slowly trend upwards from
here, in our view."
Among other precious metals, silver fell 0.03 percent
to $17.28 an ounce after sinking to the lowest in a week at
$16.96.
"The first five months of 2017 have witnessed a lack of
clear direction in silver prices," said Metals Focus in a note.
"Since then, however, silver has had to contend with the
competing forces of, on the one hand, rising US interest rates
and a healthy domestic economy and, on the other, concerns about
the U.S. administration's ability to fulfil its economic
promises and global geopolitical concerns."
Palladium , which rose to the highest in a month
earlier in the session, retreated to trade 1.07 percent higher
at $825.75. Platinum shed 1.4 percent to $930.25 after
sinking to a more than two-week low at $922.50.
(Additional reporting by Vijaykumar Vedala in Bengaluru;
Editing by David Goodman and Peter Cooney)