By Rujun Shen
SINGAPORE (Reuters) - Gold struggled to extend gains from the previous session and stood steady above $1,600 an ounce on Thursday, as investors pondered the possibility of more stimulus measures from central banks to revive a flagging global economy.
SINGAPORE (Reuters) - Gold struggled to extend gains from the previous session and stood steady above $1,600 an ounce on Thursday, as investors pondered the possibility of more stimulus measures from central banks to revive a flagging global economy.
Gold rose to a three-week high on Wednesday, boosted by expectations that the European Central Bank (ECB) will intervene to prop up the euro zone's ailing finances after an official suggested leveraging a rescue fund to increase its capacity.
The comments by ECB Governing Council member Ewald Nowotny
boosted the euro and risk appetite, which in turn benefited gold.
But analysts doubted the rally would have much momentum as there is little sound evidence from the ECB or the U.S. Federal Reserve on what they plan to do to tackle the European debt crisis and shore up the frail economy.
"Spain's public finance problems as well as poor data from the region led investors to believe that the ECB will intervene, but the foundation of this rally is rather shaky," said Chen Min, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.
"The Fed is still ambiguous on further monetary easing and the economic conditions have not deteriorated much. As a result, gold doesn't have much potential on the upside for now."
Spot gold was flat at $1,603.81 an ounce by 0326 GMT, after rallying nearly 1.5 percent to $1,609.91 on Wednesday.
U.S. gold futures contract for August delivery lost 0.3 percent to $1,603.
Technical analysis suggested that spot gold could retrace to $1,589 an ounce during the day, said Reuters market analyst Wang Tao.
Gold in the past few months has lost its appeal to assets perceived safer by investors, such as the dollar and U.S. Treasuries.
Its fortunes now hinged on whether the U.S. central bank will embark on another round of quantitative easing, dubbed as QE3, which would raise inflation outlook and attract investors to buy gold.
Bullion rose more than 2 percent so far this year, leading the precious metals complex, but was outpaced by a 4-percent gain in the dollar index.
Investors are eyeing the Fed's policy meeting next week, seeking clues on its attitude towards QE3.
"We are going to be stuck in a $75, $100 range above $1,550 before the FOMC meeting outcome," said Ronald Leung, a dealer at Lee Cheong Gold Dealers in Hong Kong.
Physical dealers said scrap selling started to build up since late on Wednesday, but slowed down as price rally stalled.
"We might see a bit more selling if prices stay above $1,605 an ounce," said a Singapore-based dealer.
