The metal recovered early losses as the dollar retreated from a two-week high against a currency basket. It broke above $1,600 in late July on talk that both the Fed and the European Central Bank would take steps to stimulate their economies.
Further monetary easing would benefit gold by boosting liquidity and maintaining pressure on long-term interest rates, keeping the opportunity cost of holding bullion at rock bottom, as well as fuelling inflation fears and weighing on the dollar.
Spot gold was up 0.1 percent at $1,604.20 an ounce at 1209 GMT, while U.S. gold futures for December delivery were flat at $1,606.60 an ounce.
Further monetary easing would benefit gold by boosting liquidity and maintaining pressure on long-term interest rates, keeping the opportunity cost of holding bullion at rock bottom, as well as fuelling inflation fears and weighing on the dollar.
Spot gold was up 0.1 percent at $1,604.20 an ounce at 1209 GMT, while U.S. gold futures for December delivery were flat at $1,606.60 an ounce.
"My general view is that for the time being major central banks will let go of the mandate of price stability in favour of spurring growth figures, This means that the central banks in an explicit or implicit inflation targeting regime will try to anchor inflation expectations around 3.0 percent," he said. "This change would be gold price supportive."
Data on Wednesday showed U.S. industrial output rose in July at its fastest pace since April, a day after strong U.S. retail sales figures that dampened expectations the Fed will launch another round of bond-buying, or quantitative easing.
However, softer-than-expected inflation data reassured investors that price pressures would not prevent the Fed from launching more QE if a more negative view of growth emerges.
A downward surprise in U.S. inflation numbers is spurring hopes for more monetary stimulus, which would be positive for gold,"Nevertheless, investment interest remains thin and technical momentum is only neutral. As a result, we think gold could recover slightly but will probably remain caught in the familiar $1,530-1,640 trading range.
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