Singapore: Gold held below a five-month high on Thursday, hurt by profit-taking ahead of the European Central Bank`s decision on stimulus measures, and strength in Asian equities that dented the metal`s safe-haven appeal.
Market expectations are sky-high for the ECB to unveil a large-scale programme of quantitative easing - printing money to purchase sovereign bonds - resorting to its last big policy tool for breathing life into the flagging euro zone economy and fending off deflation.
The stimulus measures should increase demand for bullion, but gold could have already priced in the ECB factor. Prices climbed to $1,305 an ounce on Wednesday, their highest since August.
"Increased liquidity in the euro-region is set to boost the prices of gold, as the precious metal may enjoy fund inflows from hot money coursing through Europe," said Howie Lee, investment analyst at Phillip Futures.
Spot gold eased 0.1 percent to $1,291.51 an ounce by 0325 GMT as profit-taking sent prices lower.
A sizeable quantitative easing package could send gold to $1,320, Lee said, adding that support for any price declines would come in at $1,250.
The strength of stock markets helped keep prices in check on Thursday.
Asian shares rose to near eight-week highs on hopes the ECB`s stimulus measures would revive the flagging euro zone economy.
The metal has rallied on safe-haven bids from political and economic uncertainties in Europe, along with concerns over the health of the global economy.
The recent steep climb in gold prices - about 9 percent this month - has worried has some traders.
This was reflected in SPDR Gold Trust, the world`s top gold-backed exchange-traded fund, which saw outflows of 0.24 percent to 740.45 tonnes on Wednesday.
In news from the physical markets, Indian gold importers were offering discounts of up to $16 an ounce versus London prices, the widest in 17 months, on weak demand and expectations of a duty cut.
Persistent weakness in physical demand in top consuming region Asia could undermine any rally in gold.