SINGAPORE – Gold held steady near a 6-1/2-month high on Monday, buoyed by expectations for the Federal Reserve to take imminent easing action after the latest data painted a bleak picture of the U.S. job market.

Friday's data showed U.S. job growth slowed significantly in August, fanning hopes that the Fed will announce another round of quantitative easing, also known as QE3, at this week's policy meeting.

Easing monetary policy leads to expectations of rising inflation and drives investors to bullion, seen as a good hedge against rising prices.

"The possibility of QE3 has definitely grown, but the risk is also climbing as if we were about to draw the last card at a poker game," said a Shanghai-based trader.

"If QE3 is announced, gold is very likely to break above US$1,800. But before that we may see some fluctuation in prices."

Spot gold edged down 0.1 percent to $1,734.14 an ounce by 0640 GMT, after rising to $1,741.30 the session before, its highest since February 29.

U.S. gold lost 0.2 percent to $1,736.80, paring some of its 3-percent gain from last week.

Technical analysis showed a bullish picture for spot gold, suggesting prices may rise towards $1,786 during the day, Reuters market analyst Wang Tao said.

After months of dull trading, the precious metals market sprang into life in August as central banks around the world, especially the Fed and European Central Bank, signaled that they would launch more stimulus to aid frail economies.

Spot gold has jumped 7 percent over the past three weeks, while cash silver soared 20 percent during the period.

"Gold has been in the overbought territory since last week, and we may see some profit-taking as the volatile investment demand has been the main factor behind the recent rally," said Lynette Tan, an analyst at Phillip Futures in Singapore.

Speculators raised net bullish bets on U.S. gold futures and options rose to a six-month high 144,775 contracts in the week ended September 4, according to data from the U.S. Commodity Futures Trading Commission.

Investors piled into gold-backed exchange-traded funds as well. Holdings of gold ETFs rose to a fresh record high of 72.125 million ounces on Friday.

In other news, Hong Kong's July gold shipments to China nearly doubled on the year, while exports over the first seven months exceeded total 2011 volumes, suggesting China is well on its way to overtake India as the world's top gold consumer.