By Arpan Mukherjee Gold edged lower in Asia Thursday after a sharp rise overnight, but investors remained wary about downside risk if the U.S. Federal Reserve's rate-setting committee remains silent after its meeting next week regarding further monetary stimulus. Gold jumped about 1.5% Wednesday on the back of hopes that the Fed will announce stimulus in response to weak economic indicators. At 0453 GMT, spot gold was at $1,604.09 a troy ounce, down 71 cents from its previous close after trading in a tight $1,601.10-$1,605.70 range. Gold "could easily slip below $1,600/oz in the near term, as there is very little demand in the market," a Hong Kong trader said. Analysts at the Australia and New Zealand Banking Group said in a note that resistance is being tested, but the overnight move higher isn't convincing yet, and a sustained rally above $1,627/oz is needed to confirm the break higher. The bank said that if a breach of this level were to occur in the short term, it would be contingent on stimulus, adding that longer term, it remains broadly bullish, with gold likely to rally above $1,800/oz within 12 months. "Fundamental factors [in gold] apart from the upcoming Fed meeting and expectations of QE [quantitative easing] are weak," Commtrendz director Gnanasekar Thiagarajan said, adding that the metal could be volatile in the $1,575-$1,625/oz band. Quantitative easing would increase liquidity in the financial system, which would be bullish for gold because it is often used as a hedge against inflation. Spot silver was at $27.29/oz, down 5 cents. Commerzbank analysts said in a note that silver's price should be supported if Chinese imports of the metal pick up again, noting that in 2010 and 2011, China was one of the key drivers silver's price on the back of imports. Silver isn't immune to the negative commodity environment on account of its broad array of industrial applications, it added. It also noted that the metal is finding little support from investors, with money managers "showing reticence at the moment." Weak economic indicators also continue to weigh on prices of platinum and palladium, which are also widely used in industry. Spot platinum was at $1,399/oz, up $3, while palladium was at $563.10/oz, down $1.90. Write to Arpan Mukherjee at arpan.mukherjee@wsj.com

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