Gold Inched up on Monday as a Drop in The US Unemployment Rate

BS reported that gold inched up on Monday as a drop in the US unemployment rate did little to dampen expectations that the Federal Reserve will maintain easy monetary policy when it meets later this week.

Investors are watching progress in the US fiscal talks and potential political uproar in Italy which could jolt the market where liquidity is starting to thin as traders close books before the end of the year.

The slow improvement in the US job market and prospects for more cash printing by the Federal Reserve kept sentiment buoyant in gold, which has risen about 9% this year, mostly on the Fed's stimulus measures.

Investors await a US Federal Reserve policy meeting on Tuesday and Wednesday after which the central bank is expected to announce fresh bond purchases of USD 45 billion a month to replace Operation Twist, the Fed's program of buying longer-dated bonds with sale proceeds from shorter date holdings due to expire at the end of the year.

Mr Lynette Tan an analyst at Philip Futures in Singapore said that "Market expectation is that there could be more quantitative easing towards the end of the month, and this will be supportive of gold. But gold was likely to remain trapped in a range between USD 1,680 and USD 1,750 an ounce as many investors have moved to the sidelines watching the progress of talks in Washington to avert the fiscal cliff USD 600 billion worth of tax hikes and spending cuts due to kick off next year that is feared would trigger another recession.

A Singapore based trader said that if the Fed shows reluctance to continue purchases of mortgage-backed securities on improving economic outlook, gold will sell off but I'd say that's maybe a 10% chance.

Data from the US Commodity Futures Trading Commission showed that hedge fund and money managers cut their bullish bets on US gold last week to the lowest level since late August and also reduced silver longs. But some investors continued to pile into gold-backed exchange traded funds. Holdings of gold ETFs hit a record high of 76.129 million ounces on December 7, despite stagnant gold prices in recent weeks.

Weaker than expected exports growth in China offset the optimism on the recovery of the world's second large economy brought a set of upbeat data over the weekend, signalling slow recovery. But improving vehicle market in China is likely to provide some help for platinum group metals, used in producing exhaust-reducing autocatalysts.