By Jan Harvey
LONDON - Gold prices eased a touch on Wednesday as investors took to the sidelines ahead of a key central bankers' meeting at the weekend, which will be closely watched for signs that the US Federal Reserve is considering fresh monetary stimulus measures.
Platinum ignored the softer tone of the other precious metals to hold its ground as concerns over an outbreak of violence in major producer South Africa, which sent prices to 3-1/2 month highs last week, lent support.
The metals were held in a range by speculation that Fed Chairman Ben Bernanke, in a speech at the meeting in Jackson Hole, Wyoming, could give a clear hint that the Fed may launch a new asset-purchase programme soon.
However, some market players say he may just repeat that the Fed has room to act, which would leave the market guessing until the central bank's policy meeting on September 12-13.
“We (think) that we will see a fairly dovish Bernanke on Friday and that he will commit, if not at Jackson Hole then at the September FOMC meeting, to deliver more easing to the market,” Danske Bank analyst Christen Tuxen said.
“That's a very favourable environment for gold, and that means that in the next three months at least, there should be some upside. I'm not sure we'll necessarily test new record highs, but there is potential for closing in on the $1,800 level within the next three months.”
She said relative dollar strength in the medium term would likely cap gains as the euro zone debt crisis lingered.
Spot gold was down 0.3 percent at $1,662.05 an ounce at 1152 GMT, while US gold futures for December delivery were down $4.90 an ounce at $1,664.80.
Gold is up nearly 2 percent since August 22, when the minutes of the Fed's last policy meeting suggested the US central bank was ready to deliver another round of gold-friendly monetary easing “fairly soon” unless the economy improved.
Further monetary easing would maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom, undermine the dollar, boost liquidity, and fuel fears of inflation further down the line.
Shares and the euro were stuck in tight ranges on Wednesday with investors reluctant to make any moves ahead of Bernanke's speech on Friday and details of the European Central Bank's response to the region's debt crisis.
Investors are expecting the ECB to unveil soon an effective plan to tackle the high borrowing costs facing struggling euro zone nations like Spain. - Reuters