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 SINGAPORE: Spot gold held steady above $1,700 per ounce on Tuesday, as investors watch a meeting of euro zone finance ministers later in the day in hopes that European policymakers will take decisive steps to tackle the region's debt crisis.

Finance ministers of the euro zone are expected to approve details of leveraging the European Financial Stability Facility rescue fund to help prevent contagion in bond markets, and release a vital aid lifeline for Greece.

Euro zone leaders face increasing pressure from other countries and rating agencies to solve the two-year-old debt crisis, which threatens to split up the single-currency bloc and sink the global economy, causing distress in financial markets.

"We remain bullish on gold, because we think the solutions are going to need more aggressive monetary policy, which will be positive for gold," said Jeremy Friesen, a commodities strategist at Societe Generale in Hong Kong.

But gold is unlikely to stage new highs as trading activity slows ahead of the year-end, with traders booking profits and moving to the sidelines of the market before the holidays.

"I wouldn't be surprised that we don't see much strength towards the end of the year, but into 2012 we should see aggressive monetary policy being reflected in prices of gold," Friesen added.

Spot gold traded flat at $1,712 an ounce by 0720 GMT, after staging its biggest one-day rally in three weeks on Monday with a climb of nearly 2 percent.

US gold edged up 0.1 percent to $1,712.70.

Market participants continue to watch the euro zone's bond market, currencies, and moves by central banks in Europe, the United States and elsewhere for clues to monetary policy shifts.

In the absence of major breaking news, gold is likely to move around $1,700 until the end of the year, traders and analysts said.

Managed money, including hedge funds and other speculators, trimmed its net long position in gold futures and options during the week ended Nov. 22, and the open interest fell to its lowest level since early April.

But holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, remained unchanged at 1,297.324 tonnes, their highest since early August.

Price-sensitive physical buyers again moved to the sidelines after prices rebounded above $1,700, dealers said.

Spot palladium led the precious metals complex with a rise of 1.1 percent, to $579.23, rebounding from a 7-1/2-week low of $561.25 hit on November 25.

Copyright Reuters, 2011

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