Gold inches up, investors look for firm policy steps

SINGAPORE: Gold inched up on Thursday after a drop in China's consumer inflation left room for monetary easing there, though most investors remained on the sidelines, looking for clear signals on possible economic stimulus in Europe and the United States.

Trading interest has been sluggish in the past few days as market participants wait for the European Central Bank to announce details of a bond-buying programme, while the US Federal Reserve gave few hints on further easing at its last policy meeting in early August.

"There seems to be sense of frustration that gold hasn't pushed out of the July ranges. But the frustration may come to an end soon as we see a pennant formation on the chart," said Nick Trevethan, senior commodity strategist at ANZ in Singapore. He was referring to a chart pattern in which converging trendlines, generally displayed as lower highs and higher lows in narrowing trading ranges, are followed by a breakout in either direction.

The next key event for the gold market will be the annual economic policy symposium in Jackson Hole, Wyoming in late August, Trevethan added.

"The breakout on the chart will be contingent on the commentaries that emerge from the symposium," he said.

Spot gold had edged up 0.3 percent to $1,616.22 an ounce by 0324 GMT.

The US gold futures contract for December delivery gained 0.2 percent to $1,619.10.

Trading volume on the popular Shanghai gold spot deferred contract dropped to a three-month low of 8,872 contracts on Wednesday, after double-counting. The contract stood at 331.31 yuan a gram, or $1,622.64 an ounce.

Rampant money printing by central banks is seen to support gold demand, as it raises the inflation outlook and drives investors to gold, a hedge against rising prices.

China's annual rate of consumer price inflation eased to a 30-month low of 1.8 percent in July, leaving the central bank room to further ease its monetary policy to keep China's economic growth buoyant.

But investors are now eyeing upcoming data such as industrial output and fixed-asset investment for a better picture on the condition of the world's No.2 economy.

China overtook India as the world's top gold consumer late last year. In the first half of 2012, gold inflows from Hong Kong, a key conduit for China's gold imports, grew about sixfold from a year earlier.