Gold fell below $1,600 an ounce on Wednesday, a level it broke above last week after euro-friendly comments from the European Central Bank, as speculation lessened that the Federal Reserve would hint at a new round of monetary stimulus later in the day.
Analysts had hoped the Fed would give more guidance on the likelihood of gold-friendly action like monetary easing at the end of its two-day meeting on Wednesday, keeping pressure on long-term interest rates and curbing the dollar.
But better-than-expected jobs data, which boosted the dollar, helped dampen speculation of fresh stimulus measures, which a healthier snapshot of the jobs market makes less likely.
Spot gold was down 1 percent at $1,597.04 an ounce at 9:51 a.m. EDT (1351 GMT), while U.S. gold futures for August delivery were down $14.00 an ounce at $1,600.60.
The rally that took the metal to its highest since mid-June at $1,629.10 an ounce last week stalled against resistance. Gold remains within the $150 range it has held to for the last 3-1/2 months.
"We'll probably be in this range-trading environment until the end of August, beginning of September, when we are looking for some more measures for central banks," Deutsche Bank analyst Michael Lewis said.
"By September, the possibility of more monetary action could be the trigger for a bit of a recovery to take hold."
Until then, the metal is chiefly being driven by the euro/dollar exchange rate, with gains in the U.S. unit making dollar-priced commodities more expensive for other currency holders, and gold less attractive as an alternative asset.
The dollar briefly rose against the euro as data showed the U.S. private sector added 163,000 jobs in July, beating forecasts for 120,000, though it quickly steadied.
The euro had already rolled back gains earlier on Wednesday on renewed doubts on the ECB's scope for further measures to fight the region's debt crisis.
The bank's leader Mario Draghi boosted hopes for strong measures to tackle the issue when he said last week he would do anything necessary to help the single currency.
The single currency is down nearly 5 percent against the dollar so far this year, hurt by the expanding euro zone debt crisis, which has forced Portugal, Ireland and Greece to seek international aid and led to soaring borrowing costs in Spain.
QE3 'REMAINS A POSSIBILITY'
"ECB president Draghi's comments about doing whatever is necessary to sustain the common currency have already boosted the sector, prompting gold to move from around $1,580 an ounce to current levels of $1,620," RBS said in a report on Wednesday.
"A disappointing message from policy makers could trigger a correction back below $1,600 an ounce," it added. "Regardless of this week's decision and comments, RBS maintains the view that QE3 remains a possibility further ahead."
The euro zone's ESM rescue fund will be granted a banking license, giving it enough fire power to head off the bloc's debt crisis, Italian Prime Minister Mario Monti said on Wednesday.
From a technical perspective, analysts at ScotiaMocatta say gold's unimpressive price performance since its break above $1,600 an ounce last week means it remains in consolidation mode, having traded in a $150 range for 3-1/2 months.
"The high on this move has only been 1629, which has so far failed to surpass the June high of 1641," they said. "We remain neutral until we see a break of resistance at 1640 or below support of 1602 (from the breached downtrend)."
Barclays Capital, meanwhile, indicated resistance at $1,630/1,640 and support at $1,600/1,590.
Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, rose 3.32 metric tons (3.65 tons) on Tuesday, date from the fund showed. That pared its monthly net outflow back to just over 27 metric tons, the biggest one-month drop in its holdings this year.
Silver was down 2.3 percent at $27.26 an ounce, while spot platinum was down 1.7 percent at $1,386.49 an ounce and spot palladium was down 0.8 percent at $581.03 an ounce.