Gold traded steady above US$1,700 an ounce on Monday, as a drop in the US unemployment rate did little to dampen the outlook for easy monetary policy, which is expected to be reaffirmed at a Federal Reserve meeting later this week.
Investors are watching progress in the US fiscal talks and potential political uproar in Italy, which could jolt the market where liquidity is starting to thin as traders close books before the end of the year.
The slow improvement in the US job market and prospects for more cash printing by the Federal Reserve kept sentiment buoyant in gold, which has risen about 9 percent this year, mostly on the Fed's stimulus measures.
Investors await a US Federal Reserve policy meeting on Tuesday and Wednesday, after which the central bank is expected to announce fresh bond purchases of US$45bn a month to replace Operation Twist, the Fed's program of buying longer-dated bonds with sale proceeds from shorter date holdings, due to expire at the end of the year.
"Market expectation is that there could be more quantitative easing towards the end of the month, and this will be supportive of gold," said Lynette Tan, an analyst at Philip Futures in Singapore.
But Tan said gold was likely to remain trapped in a range between US$1,680 and US$1,750 an ounce as many investors have moved to the sidelines watching the progress of talks in Washington to avert the "fiscal cliff", US$600bn worth of tax hikes and spending cuts due to kick off next year that is feared would trigger another recession.
Spot gold was little changed at US$1,705.59 an ounce by 0312 GMT, trying to stand firm above the 100-day moving average at US$1,702.64. US gold was almost flat at US$1,704.20.
Hedge fund and money managers cut their bullish bets on US gold last week to the lowest level since late August, and also reduced silver longs, data from the US Commodity Futures Trading Commission showed.
But some investors continued to pile into gold-backed exchange-traded funds. Holdings of gold ETFs hit a record high of 76.129m ounces on December 7, despite stagnant gold prices in recent weeks.
The brightened economic outlook in China after data over the weekend showed eight-month highs in factory output and retail sales in November helped support platinum group metals.
Platinum and palladium are widely used in producing exhaust-reducing autocatalysts. Spot platinum hit a more than one-week high of US$1,612.50, and spot palladium gained 0.4 percent to US$695.87, close to a near three-month high of US$698.50 hit in the previous session.