(Adds closing in Tokyo)
By Lewa Pardomuan
SINGAPORE, Dec 10 Gold bounced on bargain hunting on Monday after a drop of around 1 percent last week, but the metal was likely to trade in a tight range ahead of a decision by the U.S. Federal Reserve on interest rates.
Spot gold XAU= rose to $798.00/798.80 an ounce from $794.90/795.70 late in New York on Friday, when it fell more than $8 an ounce on the back of weaker crude oil.
Gold has been stuck in a tight range in recent days ahead of the Fed rate decision on Tuesday, and some investors were cautious after data showing steady U.S. job growth cooled expectations of a large cut in key interest rates.
"Gold is consolidating within the range of $785 to $805. Market participants are just waiting for the rate rate cut announcement before taking any actions," said William Kwan, a dealer at Phillip Futures in Singapore.
"When the payroll is better, they may not cut so aggressively. However any rate cut will be good for the precious market. It will add excess liquidity," he said.
In another volatile day of trading, dealers noted bargain hunting around Monday's low around $793 an ounce which pushed up the price to above $799.
But profit taking was also seen at higher levels, with physical dealers in Singapore expecting sales of gold scraps from Indonesia, Southeast Asia's largest consumer.
The Fed is seen cutting its target for overnight rates by at least a quarter-point to 4.25 percent this week, but interest rate futures have cut the implied chance of a half-point cut to about 25 percent from near 60 percent last week FEDWATCH.
Friday's November payrolls data showed a 94,000 increase in employment and the jobless rate holding at 4.7 percent, suggesting the economy was not falling off a cliff.
The euro was steady at $1.4656 EUR=, hovering above a three-week low of $1.4525 hit last week.
"As long as gold manages to sustain above $790, buying could creep in on all dips, preventing a major slide. However, it needs to clear $810 for the rally to sustain," said Pradeep Unni, an analyst at Vision Commodities in Dubai.
"Immediate resistance is around $808 and $815," he said.
U.S. bank JPMorgan said on Friday precious metals could rally in 2008 as the U.S. dollar falls and supply flattens, ranking the sector the strongest among all commodities for next year. [ID:nN07447941]
Expectations of further rate cuts in December, record-high crude oil and uncertainty in the U.S. credit market propelled gold to above $845 last month -- a whisker away from the record peak of $850 hit in 1980.
But trading has been volatile since, with investors keen to book profits ahead of the year-end and declines in oil ignited selling from speculators. Gold tumbled to $777 an ounce -- the lowest since Nov. 20 -- in early December.
U.S. crude futures CLc1 extended last week's losses, hovering around $87 a barrel on Monday, on expectations that a modest Fed interest rate cut would limit pressure on the U.S. dollar.
COMEX gold futures rose in Asia after falling in New York on Friday. Most active February contract GCG8 was trading up $3.5 an ounce at $803.7 an ounce.
The most active October 2008 contract on Tokyo Commodity Exchange <0#JAU:> ended 10 yen per gram higher at 2,891 yen to track firm cash market.
Platinum XPT= rose to $1,460/1,465 an ounce from $1,455/1,460 from late New York levels.
Palladium XPD= fell to $343.00/347.00 from $345.50/348.50 an ounce in New York.
Silver XAG= rose to $14.35/14.40 an ounce from $14.33/14.38 an ounce. Precious metals prices at 0712 GMT Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 797.75 3.15 +0.40 25.49 Spot Silver 14.35 0.00 +0.00 11.67 Spot Platinum 1460.00 -5.00 -0.34 28.98 Spot Palladium 343.00 -5.00 -1.44 3.31 TOCOM Gold 2891.00 10.00 +0.35 18.24 56190 TOCOM Platinum 5107.00 -1.00 -0.02 20.05 27162 TOCOM Silver 520.70 0.00 +0.00 5.55 630 TOCOM Palladium 1248.00 -5.00 -0.40 -0.56 270 Euro/Dollar 1.4652 Dollar/Yen 111.57 TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce. (Additional reporting by Miho Yoshikawa in Tokyo; Editing by Ben Tan)
Our top photos from the last 24 hours.