Gold steady as euro zone faces crucial week

Gold prices traded steady on Monday, after posting their sharpest weekly rise in more than a month, as the euro zone kicks off a week packed with meetings and decisions crucial to the solution to its debt crisis as well as the euro.

The two-year-old debt crisis has not only pushed a few euro zone nations to the brink of bankruptcy, but also threatened to split the single currency bloc and sink the global economy.
Later in the day, French President Nicholas Sarkozy and German Chancellor Angela Merkel are set to meet to align their positions on closer fiscal integration of the region.
Although financial markets have rallied recently on a joint move by central banks to inject liquidity as well as hopes for a decisive move by the European leadership to fight the debt crisis, the outcome of the summit is far from certain.
"We've witnessed a number of EU summits trying to tackle the problem, but none of them has been particularly effective," said Li Ning, an analyst at Shanghai CIFCO Futures.
"Fiscal unity is not something that can be agreed upon at one meeting, as countries have different stands on the issue."
Spot gold was little changed at USD 1,747.29 an ounce by 0326 GMT, after rising nearly 4% in the previous week.
US gold traded nearly flat at USD 1,751.50.
Gold has the potential to move higher in the short term after trading in a tight range around USD 1,750 in the past few sessions, riding on optimism ahead of the summit, but the rise may be stemmed at the key resistance level at USD 1,800, Li added.
Market sentiment is also supported by better-than-expected US employment data from last Friday, amid a raft of positive economic data from the world's biggest economy recently.
Gold has tracked moves in riskier assets in recent market turmoil, including commodities and equities, as tight liquidity in the market forces investors to quit their profitable gold positions to cover margin calls in other markets.
Besides the Friday summit, investors will also watch a policy meeting of the European Central Bank on Thursday. Economists expect the ECB to cut rates and throw more funding lifelines to stressed banks.
Loosening of monetary policies will help send gold prices higher, as the heightened inflation outlook enhances gold's appeal as a good inflation hedge.
Managed money cut its net long positions in US gold futures and options for a second consecutive week in the week ended Nov 29. The total open interest fell to its lowest in 10 months, suggesting decreased liquidity and trading interest in the market.
Spot palladium gained 0.4% to USD 644.90 an ounce, extending a 14-percent rise from the previous week -- its biggest one-week gain in more than three years.