Investing.com - Gold prices held near a three-week high on Monday, amid expectations that the European Central Bank is moving closer to embarking on quantitative easing measures to spur inflation.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery tacked on $1.60, or 0.13%, to trade at $1,200.00 a troy ounce during U.S. morning hours.
On Friday, Comex gold prices rose to a session high of $1,207.60 a troy ounce, the most since October 30, before settling at $1,197.70 by close of trade, up $6.80, or 0.57%.
Futures were likely to find support at $1,173.90, the low from November 19, and resistance at $1,216.50, the high from October 30.
European Central Bank President Mario Draghi warned Friday that inflation expectations were declining to levels that were very low and said it is ready to expand its stimulus program to boost inflation as quickly as possible.
The ECB's current stimulus program includes purchases of asset-backed securities and covered bonds, though markets are keeping a close eye out for plans to announce purchases of government debt, a stimulus tool known as quantitative easing.
Meanwhile, the People's Bank of China cut its benchmark one-year deposit rate by 25 basis points to 2.75% on Friday and trimmed its one-year lending rate by 40 basis points to 5.6%.
Gold can benefit from such an environment of easy money because of expectations that ample liquidity would put a damper on the value of paper currencies.
Gold prices are likely to remain vulnerable in the near-term amid indications a strengthening U.S. economic recovery will force the Federal Reserve to start raising interest rates sooner and faster than previously thought.
Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.
In the week ahead, the U.S. is to release a string of economic reports on Wednesday due to Thursday’s Thanksgiving holiday, including a look at unemployment claims and durable goods orders.
Also on the Comex, silver futures for March delivery picked up 3.4 cents, or 0.21%, to trade at $16.49 a troy ounce.
Elsewhere in metals trading, copper for March delivery advanced 0.5 cents, or 0.18%, to trade at $3.035 a pound, as traders weighed whether a surprise rate cut in China would translate into an increase in demand for the industrial metal.
The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.