Gold prices firmed on Friday ahead of a speech from Federal Reserve chief Ben Bernanke in Jackson Hole, Wyoming, at which he is expected to give clues as to the likelihood of another round of U.S. monetary stimulus.
Bernanke's speech at 1400 GMT will be closely watched for signs that the Fed is considering another imminent round of gold-friendly moves to boost growth such as quantitative easing, or money printing to buy bonds.
Gold, silver and platinum were all on course to post their best month since January, lifted in part by speculation over steps the Fed may take to boost sluggish growth.
Gold prices jumped to 4-1/2 month highs at $1,676.45 an ounce on Monday, driven by talk of more QE. They have since settled back as investors await Bernanke's speech, and may be vulnerable to a correction if it disappoints.
"There is certainly something already priced in for Jackson Hole, and there is a bit of disappointment potential here," Tobias Merath, an analyst at Credit Suisse, said.
"Expectations for more monetary easing would have to be fulfilled to break higher here," he added. "For now, we have a bit of a cautious approach to the gold market."
"We still think the base case is for further sideways trading, and that would only change if investment interest picks up to the extent that we are able to break (technical resistance at) $1,700."
Spot gold was up 0.2 percent at $1,659.26 an ounce at 1137 GMT, while U.S. gold futures for December delivery were up $5.00 an ounce at $1,662.10.
European shares, the euro and oil all rose ahead of Bernanke's speech, while a 0.5 percent drop in the dollar index lent support to gold.
Gold prices more than doubled after the U.S. central bank launched its first round of QE in 2008. Easing measures keep long-term interest rates, and hence the opportunity cost of holding gold low, boost liquidity, undermine the dollar and fuel fears of inflation further down the line.
The prospect of more QE will largely be dependent on forthcoming U.S. data, analysts said.
"What investors have to try to bear in mind when assessing Bernanke's comments later today is that before the Sept. 12-13 FOMC meeting, there is one payrolls report and two initial claims releases," UBS said in a note. "These data releases will be hugely relevant to the outcome of further easing, or not."
INDIAN IMPORTERS HOLD BACK
Gold importers in number one bullion consumer India were awaiting a bigger price correction in the precious metal on Friday, after it hit a series of record highs in rupee terms, denting Indian demand.
"Demand is slow," Ketan Shroff, director at Pushpak Bullion, a wholesaler in Mumbai, said. "Everybody is eyeing that statement from Bernanke."
Silver was up 0.6 percent at $30.59 an ounce.
It was on track for its biggest monthly rise in seven months, outperforming the other precious metals to climb nearly 10 percent. This may make it more vulnerable to losses that the others if Bernanke disappoints, analysts said.
Spot platinum was up 0.4 percent at $1,506.70 an ounce, while spot palladium was up 0.6 percent at $619.25 an ounce.
Platinum, which has been lifted by worries about supply after as outbreak of violence in major producer South Africa as well as hopes for monetary easing, has risen 6.8 percent this month.
Discussions between platinum miner Lonmin , unions and government to end a strike that has stopped production for more than two weeks have been suspended until Monday due to funerals for those killed in a labour fight, a union said on Friday.
Production at Lonmin's Marikana mine remains suspended two weeks after clashes between unions led to the death of 44 people, including 34 striking miners shot dead by police.
Inflows into platinum-backed exchange traded funds rose to their highest in 18 months in August as the unrest flared.