Investors disappointed by diminishing prospects of monetary stimulus in US.
Gold was broadly steady in thin trade yesterday but was headed for a weekly decline of more than 2 per cent as investors were disappointed by the diminishing prospects of monetary stimulus in the United States.
Bullion touched a near three-month low of $1,611.80 (Dh5,920) last week after the minutes from a US Federal Reserve policy meeting showed a waning appetite for another round of bond purchases.
Spot gold has rebounded from that level to trade at $1,629.79 per ounce at 7.08am GMT, but is still on course for a 2.3 per cent weekly decline, snapping two straight weeks of gains.
"Gold fell below the previous range that it had held for a while," said Hou Xinqiang, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.
"If we don't see any significantly supportive factor, it will be difficult for gold to regain a firm footing above the $1,630 level in the short term."
Hou said a string of upbeat US economic data in recent months and the Fed's attitude towards monetary easing would weigh on gold.
The latest data showed initial jobless claims in the United States last week fell to the lowest level in nearly four years, suggesting the labour market is on the mend.
Trading was thin as many markets were closed for the Easter holiday.
Strength in the dollar offset gold's safe-haven appeal as fears about the Eurozone debt crisis resurfaced after a Spanish government debt auction last week was poorly received.
Concern about the ailing Eurozone sank the euro to the lowest level since mid-March against the dollar, and consequently helped the dollar index rise to a three-week high in the previous session. A stronger greenback makes dollar-priced commodities more expensive for buyers holding other currencies.
Spot silver inched up 0.2 per cent to $31.72, extending a 1.1-per cent rise in the previous session.
The metal is on course for a weekly fall of 1.5 per cent.