PRECIOUS-Gold pares gains as dollar comes off lows on U.S. data

    * Dollar pares losses on strong U.S. service sector data
    * Markets have largely priced in Fed rate hike in December

 (Updates prices, adds comment, adds NEW YORK to dateline)
    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, Oct 4 (Reuters) - Gold pared gains on
Wednesday as the U.S. dollar came off its lows on strong data
from the U.S. service sector index.             
    Having touched its lowest since mid-August on Tuesday, spot 
gold        was up 0.2 percent at $1,274.41 per ounce by 2:25
p.m. EDT (1825 GMT). Earlier on Wednesday, it reached a high of
$1,282 per ounce. 
    U.S. gold futures         for December delivery settled up
$2.20, or 0.2 percent, at $1,276.80 per ounce. 
    "We had a number of days of decline in a row, and once we
had some dollar softness, there was an excuse for gold to rally
a little," said Rob Haworth, senior investment strategist at
U.S. Bank Wealth Management in Seattle.
    A weaker dollar makes dollar-priced gold cheaper for
non-U.S. investors. 
    Investors would be listening closely to comments by Fed
Chair Janet Yellen later Wednesday at a Federal Reserve Bank of
St. Louis event, for more hints about possible U.S. interest
rate increases through 2018, Haworth added.
    The greenback eased against a currency basket        after a
Politico report said Fed Governor Jerome Powell was favored by
U.S. Treasury Secretary Steven Mnuchin as the new Fed chair over
former governor Kevin Warsh. Yellen's term expires in February.
    Powell is seen as more dovish than Warsh, who has criticized
the Fed's bond-buying program in the past.       
    Dollar money market futures were pricing in about a 70
percent chance of a rate hike by December, but a more dovish Fed
candidate would likely prompt investors to bet on a slower
retreat from the current loose monetary policy. 
    The U.S. dollar pared its losses after data showed a service
sector index increasing to its highest level in more than 12
    Global equities hit a fresh intra-day high, helped by signs
of strong economic growth worldwide, boosting the likelihood
that the Fed will raise rates at its December meeting.
    Soaring equities tend to dent the appeal of gold, seen as a
safe haven.
    "We still feel comfortable with our cautious view on gold as
the rebound of the dollar should continue while the slide in
(gold) prices increases the risk of further position squaring in
the futures market and could trigger selling in the physical
market," said Julius Baer in a note.
    Silver        dipped 0.04 percent at $16.59 an ounce.
    Platinum        rose 0.7 percent at $913.70 an ounce, while
palladium        climbed 1.1 percent at $925.40 per ounce. The
sister metals, widely used as autocatalysts, hit price parity
for the first time in 16 years last week.

 (Additional reporting by Apeksha Nair and Arpan Varghese in
Bengaluru; Editing by Mark Potter and Rosalba O'Brien)