Reuters reported that gold held steady near a 6-1/2-month high buoyed by expectations for the Federal Reserve to take imminent easing action after the latest data painted a bleak picture of the US job market.

Friday's data showed US job growth slowed significantly in August, fanning hopes that the Fed will announce another round of quantitative easing also known as QE3 at this week's policy meeting. Easing monetary policy leads to expectations of rising inflation and drives investors to bullion, seen as a good hedge against rising prices.

A Shanghai based trader said that "The possibility of QE3 has definitely grown but the risk is also climbing as if we were about to draw the last card at a poker game. If QE3 is announced, gold is very likely to break above USD 1,800. But before that we may see some fluctuation in prices."

Spot gold edged down 0.1% to USD 1,734.14 an ounce by 0640 GMT, after rising to USD 1,741.30 the session before its highest since February 29. US gold lost 0.2% to USD 1,736.80 paring some of its 3% gain from last week.

Mr Wang Tao Reuter’s market analyst said that technical analysis showed a bullish picture for spot gold suggesting prices may rise towards USD 1,786 during the day.

After months of dull trading, the precious metals market sprang into life in August as central banks around the world especially the Fed and European Central Bank signalled that they would launch more stimuli to aid frail economies. Spot gold has jumped 7% over the past 3 weeks while cash silver soared 20% during the period.

Mr Lynette Tan an analyst at Phillip Futures in Singapore said that "Gold has been in the overbought territory since last week and we may see some profit-taking as the volatile investment demand has been the main factor behind the recent rally."

Source - Reuters

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