LONDON: Gold prices rose towards two-week highs on Thursday, with investors reluctant to make big bets after pricing in an expected European Central Bank (ECB) rate cut, with investors moving on to focus fully on key US jobs data on Friday.
Spot gold was up 0.2 percent at $1,618 an ounce by 1004 GMT, treading water along with equities and the euro, also little changed ahead of the ECB meeting, where policy makers are likely to cut rates to a record low to contain the debt crisis.
Bullion is up more than 1 percent on the week, potentially heading towards its first back-to-back weekly gains since late February.
COMEX gold futures for August delivery traded down 0.2 percent on the day at $1,618.70 in electronic dealing.
The Bank of England, also due for a rate decision later in the day, is expected to launch a third round of monetary stimulus, with June economic data showing signs of economic slowdown.
"I think the ECB is priced in -- it's been a case of buy the rumour all week and now probably some profit taking on the announcement," Societe Generale analyst Robin Bhar said.
"The market would really need something big like a Fed move - not the ECB or Bank of England which is a bit more of a minor consideration."
Friday's June US employment data is likely to reflect the impact of the euro zone crisis and weak economic data and this could encourage the Federal Reserve to take more measures to stimulate economic growth.
The US monthly jobs report is expected to show 90,000 workers were added to nonfarm payrolls in June and the unemployment rate held at 8.2 percent.
The May report showed the slowest growth in payrolls in a year and revived speculation that the Fed could resort to more asset purchases to anchor borrowing rates to boost the economy, particularly ahead of this November's presidential election.
Softer economic data has put pressure on central banks to take a more accommodative monetary stance to help nurture the global economy back to health.
Gold prices thrive in a low interest rate environment as it reduces the opportunity cost of holding the metal that has no yield. Investors rely on increases in its outright value for a return on their investment.
"Business surveys continue to point to persisting economic weakness in the euro zone and the UK. Both the ECB and the Bank of England...have gone beyond conventional policy by buying assets or providing unusually large loans to banks," Credit Suisse said in a research note.
"Given weak growth and falling inflation, we nevertheless expect further easing announcements today. The ECB is likely to cut its main policy rate and the rate it pays for banks deposits."
The latter should help lower already very low short-term money market rates further, and the BoE is likely to expand its asset purchase programme by another 50 billion pounds.
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Bhar said gold had managed to secure a platform above $1,600 and was now tackling resistance at $1,620-25. "If it could get through that there's $1,640, but that looks difficult if not impossible," he said.
Investment demand for bullion has fallen in recent months on economic uncertainty and has resulted in the dollar emerging as a safe-haven to the detriment of gold.
Holdings of gold in exchange-traded funds, often used as a gauge of longer-term investor demand, have eased this week, but remain less than half a percent off March's record high above 70.89 million ounces.
In India, one of the world's leading consumers of gold, demand for the metal was subdued on Thursday after a drop in the rupee lifted prices during a traditionally lean buying season.
Silver was up 0.5 percent at $28.26 an ounce.
Platinum rose 0.61 percent to $1,481.75, while palladium rose 0.56 percent to $595.25.
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