Gold firms above $1,700/oz on hopes of less aggressive Fed

Gold prices held above the key $1,700 per ounce level on Monday, as hopes that the Federal Reserve might slow the pace of rate hikes after mixed US jobs data helped offset pressure from a robust dollar.

Spot gold was steady at $1,711.62 per ounce by 0848 GMT. US gold futures rose 0.1 per cent to $1,724. However, trading is expected to be thin with most of the US markets closed for Labour Day holiday. Gold posted its best day in nearly a month on Friday after US data showed moderate wage growth in August and a rise in the unemployment rate to 3.7 per cent suggested the labor market was starting to loosen.

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"Expectations around future Fed rate hikes have softened slightly but the jobs report will have to be paired with a good inflation reading to have any material impact," said Craig Erlam, senior market analyst at OANDA. "We may see some support for gold above $1,700 for now but with the dollar so favoured and central banks not easing off the brake, further downside pressure may still come and a break below $1,680 looks very possible."

The European Central Bank is due to meet later this week, where it is expected to deliver a large 75 basis-point interest rate hike to tame record high inflation. Fed's next policy meeting is scheduled for Sept. 20-21. Weighing on gold, the dollar index notched a 20-year high against its rivals, making bullion expensive for holders of other currencies.

European shares tumbled after Russia extended a halt on gas flows down the Nord Stream 1 pipeline to Europe, sparking worries over energy prices. Spot silver rose 0.5 per cent to $18.11 per ounce, platinum gained 0.7 per cent to $840.50, while palladium eased 0.1 per cent to $2,021.45. Stronger-than-expected platinum shipments to China in the first half of the year spurred shortages elsewhere, as supply declined from mines and recycling, the World Platinum Investment Council said.