Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday as traders reacted to a stronger than expected employment report.

The most active gold contract for April delivery fell 6.7 U.S. dollars, or 0.55 percent, to settle at 1,209.40 dollars per ounce.

Gold was put under pressure as the U.S.-based Automated Data Processing released a report on Wednesday showing an increase of 298,000 in private payrolls.

Analysts note this is the strongest reading of this measure since October 2015, and put extensive pressure on the precious metal as it raised expectations for the big jobs report due on Friday.

The U.S. Dollar Index rose by 0.26 percent to 102.08 as of 1800 GMT. The index is a measure of the dollar against a basket of major currencies.

Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Analysts believe that the unexpectedly positive jobs data will have an impact on expectations for a Fed rate hike. Investors now believe the Fed may raise rates from 0.75 to 1.00 during the March FOMC meeting.

According to the CME Group's Fedwatch tool, the current implied probability of a hike from 0.50 to at least 0.75 is at 86 percent at the March meeting and 80percent for the May meeting, along with a 7 percent chance of an increase to a 1.0 rate.

Gold's fall was capped as the U.S. Dow Jones Industrial Average fell by 38.37 points, or 0.18 percent as of 1836 GMT. Analysts note that when equities post losses, the precious metal usually goes up, as investors are looking for a safe haven, while the opposite is true when U.S. equities post gains.

Traders are looking to the rest of the week for the Automated Data Processing employment report on Wednesday, weekly jobless claims report on Thursday, and the aforementioned big jobs report on Friday.

Silver for May delivery dropped 23.8 cents, or 1.36 percent, to close at 17.298 dollars per ounce. Platinum for April delivery fell 11.6 dollars, or 1.21 percent, to close at 949.50 dollars per ounce.