Gold prices fight to hold ground above key level, Fed in focus

Gold fought to hold steady above a key technical level on Wednesday, after snapping a four-day slide in the previous session on hopes the U.S. Federal Reserve would opt to continue with monetary stimulus.

The central bank is expected to confirm in a statement at 1915 GMT that it will keep up $85 billion in monthly bond buying until unemployment rates drop significantly, although officials have shown concern over side effects from such measures. Investors are also waiting for nonfarm payrolls data on Friday for a close look at the U.S. labour market. Economists surveyed by Reuters expect steady hiring from employers in January, helping unemployment to stand unchanged from a month earlier at 7.8 percent.

Recent data showing signs of a steady economic recovery has depressed sentiment towards gold, a safe haven popular in times of economic and political distress.

"In the short term, gold will struggle because the U.S. data will continue to be pretty good," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong. But he added that the global inflation outlook is firming due to ultra-loose monetary policies adopted by central banks in key economies, which will benefit gold as an inflation hedge.

"Growth looks better so the market is shifting out of risky low-yield asset or zero-yield assets to equities, but inflation concerns are opposing that and may be sustaining some interest in gold.

"Rising oil prices may also stoke worries about inflation. Benchmark Brent crude matched a more than three-month high hit the session before.

Spot gold had edged up 0.2 percent to $1,666.44 an ounce by 0619 GMT. It rose above the key 200-day moving average in the previous session, which stood just below $1,663.

U.S. gold was up 0.3 percent at $1,666.

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