SINGAPORE: Gold edged up on Thursday, shrugging off a firm dollar, ahead of an expected rate cut by the European Central Bank that should boost liquidity and enhance bullion's appeal.
A recent raft of weak economic data has piled up pressure on central banks to take a more accommodative stance to nurture a fragile global recovery, putting gold on track for a third consecutive session of gains.
The Bank of England, also due for a rate decision later in the day, is expected to launch a third round of monetary stimulus as the economic outlook deteriorates.
"In the medium to long run, a rate cut will help underpin gold prices," said Li Ning, an analyst at Shanghai CIFCO Futures. Low interest rates typically spur demand for gold.
"But in the short run, a cut by the ECB will weigh on the euro and strengthen the dollar, which in turn may cap gold's ascent," Li added.
The dollar rose half a percent against a basket of currencies, while the euro wallowed near one-week lows.
Spot gold edged up $1.16 to $1,616.29 an ounce by 0328 GMT. US gold futures contract for August delivery inched down 0.3 percent to $1,617.10.
Li said $1,640, a recent high hit in early June, will be a key resistance for spot gold and $1,540 a strong support level.
Market participants will also scrutinise the ADP employment report and the weekly jobless claims figure from the United States later in the day for clues on the key non-farm payrolls data due Friday.
Disappointment over the payrolls numbers will add more pressure on the Federal Reserve to put quantitative easing back on the table, analysts said.
In industry news, one person died and police detained one of the leaders of protests against Newmont's $5 billion gold mine in Peru on Wednesday, the day after clashes between police and protesters left three people dead and 21 injured.
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