SINGAPORE: Gold hovered near a two-week high on Wednesday, helped by hopes central banks will ease monetary policy in a bid to nurture a fragile recovery in the global economy.

The European Central Bank is expected to cut interest rates on Thursday in the wake of a string of weak economic data, a move that would likely support gold as it typically benefits from a low interest rate environment.

“Investors are pinning their hopes on an ECB rate cut and the rising possibility that quantitative easing may be back on the cards for the Fed,” said Chen Li, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.

Gold will be further underpinned if hopes for another round of easing by the US Federal Reserve are enhanced by any disappointment over US non-farm payrolls data on Friday, she added.

Spot gold was little changed at $1,616.79 an ounce by 0646 GMT, after rising more than 4 per cent since last Friday. It hit a two-week high of $1,624.70 in the previous session.

The US gold futures contract for August delivery edged down 0.3 per cent to $1,617.40.

Still, some analysts were less confident about the impact another round of quantitative easing would have on the global economy.

“We worry that looser money will not have the desired effect, as its impact gets diluted each time it is used, particularly when rates are close to zero to begin with,” Ed Meir, an analyst at INTL FCStone, wrote in a research note.

Nonetheless, investors are likely to bid the markets higher over the short term if the Fed once again takes such a step, he added.

The physical bullion market in Asia was less buoyant, with major consumers India on the sidelines for the monsoon season and China in a summer consumption lull, dealers said.

Spot platinum rose to a two-week high of $1,485.75 an ounce. Spot palladium gained 1.2 per cent to $601.24, extending a rally near nearly 4 per cent in the previous session after data showed unexpectedly strong US auto sales in June.

Platinum group metals, including platinum, palladium, rhodium, are widely used to produce emission-reducing autocatalysts.

North America consumed nearly a quarter of the palladium and 12 per cent of the platinum used globally to produce autocatalysts in 2011, according to refiner Johnson Matthey.