Gold steadied around $1,400 an ounce on Thursday, after data showed the US labour market is gradually improving, while the European Central Bank left interest rates unchanged, as expected. Investors were reluctant to take big positions ahead of key non-farm payroll data on Friday, which will be scrutinised by investors for clues on when the Fed will begin possible tapering of its bond buying.
Spot gold was down 0.1 percent at $1,401.16 an ounce by 1427 GMT. US gold futures for August delivery stood up 0.2 percent at $1,401 an ounce. "The metal remains largely rangebound and is not profiting from a lower dollar today as investors are sidelined," VTB Capital analyst Andrey Kryuchenkov said.
The ECB left its main interest rate unchanged after cutting it by a 1/4 percentage point to 0.5 percent in May, and President Mario Draghi said the central bank's policy will remain accommodative for as long as needed. "They (investors) are assessing Draghi's comments, US jobless claims but most of all are awaiting non-farm payrolls tomorrow," he added.
The dollar fell to a four-week low against the euro and the yen. US economic data has been in the spotlight since Federal Reserve Chairman Ben Bernanke said last month the central bank would taper off monetary stimulus - it is currently purchasing bonds for $85 billion a month - if the US housing and job markets showed continued strengthening.
"Tomorrow's US non-farm payrolls will be instrumental to judge whether the Fed tapering is going to come sooner rather than later - whether it is in September or December that this will be announced is the big question for everything that is dollar sensitive at the moment, including gold," Tuxen added.
In the United States, initial claims for state unemployment benefits declined 11,000 to a seasonally adjusted 346,000, against an expected 345,000. Holdings of SPDR Gold Trust, the largest gold-backed ETF, held steady on Wednesday after falling 0.3 percent in the previous session. Holdings are at four-year lows. The metal came under pressure on demand concerns after the Indian government raised imports tax on the metal for the second time this year, to 8 percent on Wednesday.
Officials said they will continue to take steps to discourage gold buying in an effort to cut its import bill if needed. HSBC analyst James Steel said that while the duty hike may make bullion more expensive in India, gold prices in local currency terms are still trading at lower levels compared to last year and are still attractive to physical buyers. Gold futures in Shanghai were around $20 above spot prices, indicating that it is cheaper for the Chinese to buy gold from overseas. Silver fell 0.3 percent to $22.46 an ounce, platinum gained 0.3 percent to $1,514.99 an ounce, while palladium rose 0.3 percent to $758.50 an ounce.