Gold firmed on Thursday as the dollar fell to a seven-week low against a basket of currencies, but doubts over when the Federal Reserve will begin scaling back its monetary stimulus programme kept the metal in a narrow range
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The dollar index slid to its lowest since mid-June on Thursday on uncertainty over Fed policy, but steadied by mid-morning. Trading conditions are quiet ahead of weekly U.S. jobless data, due at 1230 GMT, analysts said.
Spot gold was up 0.2 percent at $1,288.94 an ounce at 0910 GMT, while U.S. gold futures for December delivery were up $3.40 an ounce at $1,288.70.
"You are getting some smallish moves on the back of (the dollar), but the main driver is Fed policy, which is tied heavily into the employment rate," David Govett, head of precious metals at Marex Spectron, said. "As such, everybody's waiting for these initial jobless claims figures today."
The Fed's recent monetary stimulus measures, known as quantitative easing, were a key factor in driving gold prices to record highs in 2011, as they kept long-term interest rates at rock bottom while stoking fears over inflation.
Speculation that the Fed may be set to taper QE has helped push gold prices down by nearly a quarter this year.
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The president of the Cleveland Fed, Sandra Pianalto, seen as a centrist on policy, said on Wednesday the U.S. central bank could soon curb the pace of its bond-buying stimulus if recent improvement in the job market persists.
"The bullion market's lack of a reaction to Ms. Pianalto's comments may indicate the degree of QE 'tapering' expectations already built into the gold price," HSBC said in a note.
"An announcement by the Fed later in the year to withdraw QE would be seen as less of a surprise for the gold market."
ETF OUTFLOWS PERSIST
The world's biggest gold-backed exchange-traded fund, New York's SPDR Gold Shares, said its holdings fell by another 4.5 tonnes on Wednesday, bringing its total outflow for the week to 8.1 tonnes.
Demand from China, which is poised to take over from India as the world's biggest gold consumer this year, has grown after bullion's recent correction, analysts say.
"Physical demand remains good, with China importing more than 100 tonnes of gold in June - but this has not been enough to offset financial selling recently," ANZ said in a note.
Among other precious metals, silver was up 0.9 percent at $19.73 an ounce. Spot platinum was up 0.6 percent at $1,443.99 an ounce, while spot palladium was up 0.6 percent at $725 an ounce.
Platinum's premium over gold hit a two-year high of $155 an ounce on Thursday as the white metal outperformed.
The metal has suffered in recent years from weak demand from European carmakers, but prices have been supported by threats to supply from South Africa and the launch of a new platinum ETF in Johannesburg, which added more than half a million ounces of metal to its holdings in less than three months.
Aquarius Platinum Ltd , the fourth-largest platinum producer in the world, reported a smaller full-year loss on Thursday, as production increased at two of its operational mines. (Editing by James Jukwey)