Gold and oil rose on Monday, supported by Friday's news of a potential framework for the European Central Bank's new bond buying scheme and hopes of a strong easing move by the U.S. Federal Reserve, but Asian shares eased.
Growing hopes for more accommodative monetary stance around the world helped gold break a key resistance last week, which had held for months. Spot gold hit a fresh 4-1/2 month high of $1,676.45 an ounce on Monday, while spot silver hit a near four-month high of $31.24 an ounce.
Oil futures gained more than $1 on supply concerns, with U.S. crude up 1.1 percent to $97.19 a barrel and Brent up 1.2 percent to $114.91. Oil has also been supported by expectations for more growth-supportive measures.
"Commodities which are highly sensitive to monetary policy easing are underpinned by such speculation, so it's hard to sell in markets such as gold, silver and oil where it's easier for speculative money to flow in," said Bob Takai, general manager of Sumitomo Corp's energy division.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS>, however, edged down 0.2 percent in choppy trade as investors booked gains from rallies over the past week built on optimism over stimulus.
European equities were likely to follow Asia lower, with financial spreadbetters calling Paris's CAC-40 <.FCHI> and Frankfurt's DAX <.GDAXI> to open flat to down 0.1 percent. London markets are closed for a public holiday. <.L> <.EU>
"Finally, after the really long summer holiday, we have an event to focus on, which is the Jackson Hole symposium. Sentiment has been kept up for so long because nobody expected anything to be done in the near term, but we now at least have an event," said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong, referring to the annual meeting of central bankers and economists later this week.
"There could be room for disappointment if nothing is confirmed or hinted at. So investors prefer to remain cautious or take profits and trim down their positions ahead of this," she said.
Seoul shares <.KS11> were earlier dragged lower by a plunge in Samsung Electronics <005930.KS> after a U.S. jury found it had copied critical features of Apple
Shanghai shares <.SSEC> tumbled 1.4 percent to their lowest since March 2009 on receding expectations for a more aggressive Chinese easing. Japan's Nikkei average <.N225> rose 0.4 percent. <.T>
Central bank sources told Reuters on Friday that the ECB is considering setting yield band targets under the bond-buying programme to shield its strategy from speculators, but the decision would not be made before its September 6 policy meeting.
Fed Chairman Ben Bernanke said "there is scope for further action by the Fed to ease financial conditions" in a letter he sent to a U.S. House panel, reinforcing market's persistent views the Fed would soon implement a third round of quantitative easing, known as QE3.
Traders will be seeking clues from Bernanke's speech at the Jackson Hole, Wyoming, gathering. He has used the event the previous two years to flag the Fed's intention on more easing.
Bernanke is due to speak on Friday and ECB President Mario Draghi will take the podium on Saturday.
"We expect Bernanke to clearly signal that QE3 is in the pipeline and our expectation remains that this will be delivered at (the September 12-13 Fed meeting)," Societe Generale said in a note.
ECB MOVE LESS POWERFUL
A more accommodative tone from the Fed could reassure markets but the ECB is not likely to shore up sentiment as much.
"While the ECB has answered the question of how more risk sharing can take shape, they are not writing any blank checks. Conditionality is here to stay, and with it so too is sovereign risk until the conditionality is fulfilled," Societe Generale said.
Analysts have said the ECB's plans to buy government debt to reduce borrowing costs of stricken euro zone states will help soothe market jitters, but it does not resolve the fundamental issue of strengthening the fiscal foundation of the euro zone.
Greece remains a risk trigger for reversing the current moderately improved sentiment towards Europe.
German Chancellor Angela Merkel has said she wanted Greece to remain in the euro zone but that it must meet its reform targets, while her finance minister reaffirmed his opposition to giving Athens more time to carry out promised reforms.
Data on Friday showed that money managers, including hedge funds and other large speculators, boosted bullish bets in U.S. gold futures and options to the largest amount since early May. Gold posted its biggest weekly gain since January on Friday.
Investors also kept paring short positions betting on the euro's fall last week, while long positions in favor of the U.S. dollar declined further to their lowest in nearly a year, the CFTC said.
The euro steadied at $1.2508, off Friday's low of $1.2481.
Asian credit markets weakened slightly, pushing the spread on the iTraxx Asia ex-Japan investment-grade index wider by 3 basis points.
(Editing by Eric Meijer)