SINGAPORE (Sept 4): Gold edged up on Thursday as the dollar was flat and European equities mixed, but prices were still near a 2-1/2 month low as investors remained cautious ahead of a European Central Bank meeting.
News of a ceasefire plan in Eastern Ukraine sent the metal to its weakest since mid-June at $1,261.19 on Wednesday. But as Ukraine's prime minister dismissed the proposal outlined by Russian President Vladimir Putin, the metal regained some strength.
Spot gold was up 0.3 percent to $1,272.30 an ounce by 1105 GMT, while U.S. gold futures rose $2.70 an ounce to $1,273.00. The metal was also supported by some technical and physical buying after falling below a support level of $1,265.
"We are setting up for today's ECB appointment. Obviously if nothing is announced, the euro could bounce and we could see some short-covering ahead of tomorrow's nonfarms (U.S. jobs data), and that could help gold," Societe Generale analyst Robin Bhar said.
"The metal is steadier but still in this bear trend, and my expectation is that there will be a good jobs number tomorrow after above-consensus data this week, so the dollar could rally again and gold could fall to the $1,240-$1,260 area."
The dollar was flat against a basket of currencies, but stronger against the euro before the ECB policy review later in the day.
The meeting will be closely followed to see whether the central bank delivers a fresh round of policy stimulus, as well as the impact on the euro/dollar rate, which could influence gold prices.
The ECB is under strong pressure to tackle stubbornly low inflation at a time when the conflict in Ukraine threatens to destabilise the region's fragile recovery.
Gold, seen as an insurance against risk during times of political and financial uncertainties, has gained more than 5 percent so far this year, with tensions in Ukraine and violence in the Middle East.
"The ECB meeting is more likely to be gold-bearish than gold-bullish," HSBC said in a note. "(But) gold is likely to be more influenced by U.S unemployment data due at the end of the week and the general direction of the dollar."
U.S. nonfarm payrolls data due on Friday is expected to give further clues about the world's largest economy and the timing of the Federal Reserve's move to raise interest rates.
A string of encouraging U.S. economic data, along with a sell-off in the euro and the yen, has boosted the dollar over the past few sessions and raised some speculation that the first rate hike could come earlier than the middle of next year.
Higher interest rates would hurt the attractiveness of non-interest-bearing assets such as gold.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund and a good measure of investor sentiment, fell 2.69 tonnes to 790.51 tonnes on Wednesday.
Among other precious metals, platinum rose 0.5 percent to $1,408.49 an ounce, and palladium gained 1 percent to $880.22 an ounce. The metals, used in auto manufacturing, were lifted as U.S. auto sales reached their highest August level in more than a decade.
Spot silver rose 0.6 percent to $19.20 an ounce, recovering from a 2-1/2 month low of $19.03.