LONDON: Gold prices steadied above $1,690 an ounce on Thursday, as buyers took to the sidelines ahead of a European Central Bank policy announcement, and on uncertainty over negotiations to avert a US fiscal crisis.
Confidence in gold has ebbed this month after it failed to push above $1,730 in November. A weak technical picture helped push prices to a one-month low on Wednesday, taking them below their 100-day moving average for the first time since August.
Spot gold was at $1,693.00 an ounce at 1041 GMT, little changed from $1,693.41 an ounce late on Wednesday, while US gold futures for December delivery were up 50 cents an ounce at $1,694.30.
Buyers are awaiting direction from the ECB, non-farm payrolls data on Friday, and next week's Federal Reserve policy meeting, as well as clearer signals on how the United States will deal with negotiations over its upcoming "fiscal cliff."
That refers to the possibility that a $600 billion package of tax hikes and spending cuts due to kick in in the New Year could push the world's biggest economy back into recession.
"We have the ECB decision today, with some (talk) of Spain applying now for financial help, and furthermore we have the Fed decision," LGT Capital analyst Bayram Dincer said. "Also, some people are positioning for year-end, profit taking. All of this is adding to negative sentiment in the gold market."
The ECB is likely to keep interest rates on hold on Thursday, but may offer clues on its policy path for next year with updated forecasts likely to present a grim outlook for the euro zone economy in 2013.
The bank is wary of taking any action that could see the euro zone's governments soft-pedal budget-consolidation efforts. That puts the onus on Spain to ask for a full bailout before the ECB can intervene and buy Spanish sovereign debt.
The euro slipped against the dollar on Thursday, with investors wary of the single currency on expectations the ECB may lower growth forecasts for the region.
"The focus will be on ECB staff forecasts," ING Bank said in a note. "Currently the ECB sees 2013 GDP and CPI at 0.5 percent and 1.9 percent respectively. Certainly the GDP forecast should be cut close to zero."
On the wider financial markets, European shares climbed, although some traders said they would still look to sell due to uncertainty over US budget talks, while the euro zone's blue-chip Euro STOXX 50 equity index set a fresh 2012 high.
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