* Gold fell 1.4% on Wednesday, worst day since Aug. 19
* Recovery in China's service sector lifts stocks
* Interactive graphic tracking global spread of coronavirus: open https://tmsnrt.rs/3aIRuz7 in an external browser (Adds comments, details, updates prices)
By Brijesh Patel
Sept 3 (Reuters) - Gold on Thursday recouped some of the previous session's hefty losses as the dollar steadied, although gains were capped by an uptick in risk appetite on recent better-than-expected economic data.
Spot gold XAU= was up 0.2% at $1,945.59 per ounce by 0340 GMT, after falling 1.4% on Wednesday in its biggest one-day drop since Aug. 19 on a firmer dollar and rebound in U.S. manufacturing activity.
U.S. gold futures GCv1 rose 0.4% to $1,952.20.
"Gold is tracking inversely the moves in the dollar... and part of the reason gold has not capitalised as much after Jackson Hole is risk appetite seems strong," said DailyFx currency strategist Ilya Spivak.
"Although there is positive growth, the overall economy is still very very weak in absolute terms and central banks are expected to remain dovish, which should be supportive for gold."
The dollar index .DXY held steady against a basket of major currencies after rising 0.6% in the last session. USD/
Meanwhile, data showing a sustained recovery in China's services sector and the prospect of additional U.S. stimulus whetted risk appetite, limiting gold's appeal. MKTS/GLOB
The U.S. Federal Reserve, in its "Beige Book" report, highlighted that U.S. business activity and employment ticked up through late August, but economic growth was generally sluggish as COVID-19 hotspots hampered reopening efforts. has gained about 28% so far this year, helped by ultra-loose monetary policy adopted by major central banks to mitigate the economic damage caused by the COVID-19 outbreak, which has infected nearly 26 million people worldwide so far.
Lower interest rates decrease the opportunity cost of holding non-yielding bullion.
Investors now await the initial weekly U.S. jobless claims report due later in the day, as well as U.S. payroll figures on Friday, for future direction.
Elsewhere, silver XAG= gained 0.1% to $27.52 per ounce and platinum XPT= rose 0.5% to $910.47, while palladium XPD= eased 0.1% to $2,244.76.