Gold stays above $1,600, stimulus hopes persist

SINGAPORE: Gold hovered above $1,600 an ounce on Thursday as investors continued to hope central banks would take further steps to boost the global economy, even as recent US data suggested the Federal Reserve may not need to intervene for now.

The precious metal has been trapped in a $100-trading range since mid-May, with a lack of clarity on possible steps from the Fed keeping many traders on the sidelines, curbing bullion's year-to-date gains to less than 3 percent.

Further monetary easing would boost interest in gold, seen as an effective hedge against rampant cash-printing and consequently, rising prices.

Wednesday's batch of US data added to the uncertainty over stimulus. While consumer inflation remained tepid, giving the Fed room to ease policy further, improved home-builder sentiment and industrial production led some economists to doubt the necessity of another round of bond purchases.

"(Further Fed quantitative easing has) become unlikely in the short term, as the string of negative economic surprises seem to have come to an end," Credit Suisse analysts wrote in a research note.

"What counts at the moment is the 'real' economy and while certainly far from booming, this does not appear weak enough for the Fed to act."

Spot gold had inched up 0.1 percent to $1,604.41 an ounce by 0347 GMT, off a 1-1/2 week low of $1,589.69 hit in the previous session.

US gold futures for December delivery were little changed at $1,606.90.

Later in the day, investors will seek trading cues from more data, including US housing starts and weekly jobless claims.

Traders expect market activity to pick up in September, when many return from their summer holidays and the Fed's policy-setting panel is scheduled to meet.

"We hope the market will spring into action next month, as fabrication demand rises ahead of the Christmas and Lunar New Year holidays," said a Shanghai-based trader.

 Trading interest in other precious metals was also lukewarm. The popular Shanghai silver spot deferred contract had seen just over 260,000 lots changing hands.

"Usually by now we'd see at least 400,000 lots," said the Shanghai-based trader.

Spot silver gained 0.3 percent to $27.88, after abandoning the key $28 level earlier in the week.

Platinum group metals also firmed, on upbeat sentiment in equities and base metals. Spot platinum rose 0.3 percent to $1,394.24, while spot palladium climbed half a percent to $574.97.