Spot gold edged lower on Thursday, taking a breather after rising to a three-month high in the previous session, although expectations of further monetary easing after sluggish economic data from the euro zone and China continue to support prices.

The enthusiasm in platinum waned, after supply concerns and chart strength pushed the metal, dubbed by some as the commodity du jour, to multi-month highs in the past three days.

Data showed unexpectedly weak activity in the euro zone, while China's manufacturing sector contracted for the fourth straight month, fueling anticipation that central banks will further ease monetary policy to promote economic growth.

Gold benefits from loose monetary policy, as abundant credit keeps the opportunity cost of carrying gold low. In addition, higher inflation outlook caused by a flood of cheap cash burnishes the appeal of gold, traditionally seen as a hedge against inflation.

There is always a case to be made for gold, as long as the central banks keep taking new easing measures or keep indicating they will take more new measures down the road, said a Singapore-based trader.

Weak numbers out of China strengthened the case for further easing by Beijing, he added.

Spot gold was little changed at $1,774.69 an ounce by 0713 GMT, after three consecutive days of gains.

U.S. gold inched up 0.3 percent to $1,776.50 an ounce.

Technical signals were also supportive of gold's strength. Chart analysis suggested that spot gold could extend gains to $1,797 an ounce during the day, Reuters market analyst Wang Tao said.

Scrap selling was spotted from Thailand and Indonesia, while buying from China and India remained muted, dealers in Hong Kong and Singapore said.


Spot platinum hit a five-month high of $1,726.5 an ounce earlier in the day, before retracing to $1,717.24 an ounce, down 0.2 percent from the previous close.

Prices of the metal, mainly used in jewellery and automotive sectors, rallied about 5 percent this week on chart strength and supply woes in South Africa because of labor problems at Impala Platinum, the country's second biggest producer of the metal.

The lack of forward borrowing and option buying suggest that Implats' production loss has not caused severe supply shortage, the Singapore-based trader said.

Technical analysis suggested that platinum might be running out of steam in the short run.

Bullishness on breaking the 200-day moving average may prove short-lived, said Tim Riddell, head of ANZ Global Markets Research, Asia.

The breakthrough fuelled expectations that platinum could move towards $1,790, the centre of the predominant trading range in the first three quarters of 2011, but it may be just completing a broad cycle from the December low below $1,340, he added.

What it means is that the current bullish expectations about breaking moving average needs to be tempered and any slippage below $1,690 could trigger disappointment and a sharp retracement to $1,570-$1,600 areas.