By Arpan Mukherjee Of DOW JONES NEWSWIRES WELLINGTON (Dow Jones)--Gold edged lower in thin trade in the Asia Thursday, but traders said the metal's downside risk is limited due to uncertainty ahead of the European Central Bank's rate-setting meeting and a European Union leaders' summit, both of which start later in the day. At 0515 GMT, spot gold was at $1,737 a troy ounce, down $6.10 from the late New York price after trading mostly between $1,736 and $1,742.87/oz. "There is some small profit-taking but hardly any fresh buying," Wing Fung Precious Metals Director Peter Fung said, adding that investors are awaiting details on how European leaders plan to tackle their debt problem. The ECB is widely expected to cut its policy rate and deliver other supportive measures, but investors are more attuned to news from the summit--hoping for a comprehensive strategy from EU leaders to prevent a full-blown fiscal and banking crisis in the region. Given the lack of clarity on the EU's plans to resolve the sovereign debt crisis, investors are wary of news headlines that haven't been confirmed, analysts said. "When the headline risk is so rampant, safety is likely to be in favor and gold is likely to be supported by that," IG Markets strategist Stan Shamu said. Traders said that gold will get support around $1,700/oz, and if it manages to break through $1,750/oz on the upside, it could target $1,800/oz. Brokerage UOB KayHian maintained its long-term bullish view on gold, putting the average price at $1,888/oz for 2012. "Due to rising disposable income, a lack of investment vehicles and a cultural affinity for gold, China's demand for physical gold should continue to lead the rest of the world, in our view," it said. Meanwhile, traders said they are keeping an eye on Chinese jewelry buying to see whether it helps to build up jewelers' platinum stocks ahead of the Chinese New Year, which could help the metal to outperform gold for the remainder of this year. At 0515 GMT, spot platinum was at $1,513/oz, down $10, palladium was at $673/oz, down $4 and silver was at $32.49/oz, down 2 cents. Commerzbank said the sharp rise in palladium prices over the past few sessions was probably to compensate for the sharp drop over the previous four months. "It is also interesting that the latest price rise was not accompanied by corresponding inflows into the ETFs [exchange-traded funds]--in fact, holdings of palladium ETFs have continued to fall, which would indicate that [short covering is] the main driver of the climbing prices," it said. -By Arpan Mukherjee, Dow Jones Newswires; 64-4-471-5990; arpan.mukherjee@dowjones.com

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