Gold firmed on Wednesday, rising in tandem with the euro and risky assets ahead of a European Central Bank policy meeting as investors watch for more action from policymakers to contain the euro zone debt crisis.     

The ECB is expected to indicate a readiness to cut interest rates as soon as next month but hold back from policy moves, after a Group of Seven emergency conference call on Tuesday failed to produce any concrete solution.

Gold has held steady above $1,600 an ounce since it rallied 4.3 per cent last Friday, as investors expect further monetary easing from the central banks, especially the US Federal Reserve, after data showed a surprisingly weak job market.      

The next focal point of the markets will be testimony by Fed Chairman Ben Bernanke before a congressional committee on Thursday, which is expected to shed light on the Fed's view of the economy and possible policy moves.     

'If Bernanke gives some hint on a third round of quantitative easing, we'll be likely to see gold march towards $1,650 or higher,' said Ronald Leung, a dealer at Lee Cheong Gold Dealers in Hong Kong.     

On the chart, gold appeared to have met some resistance around $1,628, the 38.2 per cent Fibonacci retracement level on the fall from this year's peak at $1,790.3 to a low at $1,527.     

Spot gold gained half a percent to $1,625.34 an ounce. The US gold futures contract for August delivery rose 0.6 per cent to $1,627.20.                      

As if to underline the dangers in the single currency bloc, Moody's cut the credit ratings of several banks in Germany - the bloc's strongest economy, citing a greater risk of further shocks from the region's debt crisis.      

But the euro shook off the downgrade and edged higher against the dollar ahead of the ECB meeting.       Spot silver climbed 1 per cent to $28.79 an ounce, extending gains from the previous session.     

'Technically, silver has tried to break $27 several times in the past few weeks and failed,' said a Shanghai-based trader, 'Similarly, it has made a couple of attempts to breach above $29 unsuccessfully.'     

'If silver is able to gain a steady footing above $29, things will look a lot better.'     

Spot palladium inched up 0.2 per cent to $620.88 an ounce, off a one-month high of $623.25 hit in the previous session. – Reuters