Gold prices eased on Wednesday as the euro ran into profit-taking and stock markets dipped, with the previous day's burst of sharper risk appetite running out of steam after German economic data fell short of expectations.
Lingering speculation that the European Central Bank will soon take action to tackle the euro zone debt crisis limited falls in both the euro and gold, but the metal failed to sustain Tuesday's rise above $1,610 an ounce.
Spot gold was down 0.3 percent at $1,606.71 an ounce at 7:38 a.m. EDT (1138 GMT), while U.S. gold futures for December delivery were down $3.30 an ounce at $1,609.50.
Prices remain in a narrow range as investors await clearer signals on central bank policy on both sides of the Atlantic.
Signs that the ECB is set to relaunch its bond-buying program to shore up the euro, or further hints of more monetary stimulus measures from the U.S. Federal Reserve, would both likely boost gold.
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"With resistance at $1,617-1,620 pretty formidable, and amidst quieter news, gold is likely to hover around $1,608-1,615 in today's trade," Richcomm Global Services senior analyst Pradeep Unni said.
"Gold seems to be supported by hopes that Europe and the United States would launch more stimulus measures to help shore up their faltering economies," he said. "Investors are betting that the festering debt crisis in the euro zone could push the ECB to launch a new round of bond-buying soon."
The euro fell 0.3 percent against the dollar after German data showed imports and exports falling.
European shares dipped 0.3 percent and safe-haven German Bund futures rebounded, while ten-year Spanish government bond yields briefly touched the 7 percent danger level as speculation grew that it may take time until Spain asks for a bailout.
Weakness throughout the financial markets is weighing on gold despite calls from top Fed official Eric Rosengren for the bank to launch another bond-buying program of whatever size and duration is necessary to get the economy back on its feet.
"Gold's steady showing despite Rosengren's call for open ended policy action suggests the jury is still out to large extent on Fed policy," ANZ Bank said in a note.
"The range bound trade of late could well continue until the Fed's Jackson Hole symposium at the end of the month."
Gold demand in major consumer India was soft at the start of the festival season, meanwhile, with rural buyers staying on the sidelines, preferring to hold on to their cash at a time when deficient monsoon rains threaten to dent their incomes.
The rural population accounts for 60 percent of the gold demand from India. Gold buying has already been hit in India by rupee weakness, which keeps local prices high, and a hike in import taxes aimed at cutting the trade deficit.
In China, which is currently vying with India as the world's top buyer of gold, the trading volume on the popular gold spot deferred contract on the Shanghai Gold Exchange stood at 11,468 contracts on Tuesday, after double-counting, down nearly 30 percent from July's average daily volume.
In August 2011, daily trading volume was 35,086 contracts.
Silver was down 0.7 percent at $27.87 an ounce, tracking losses in gold, while of the platinum group metals, platinum was down 0.6 percent at $1,397.99 an ounce, while palladium was up 0.4 percent at $582.22 an ounce.
Aquarius Platinum, the fourth-largest miner of the white metal, reported a $189 million full-year loss on Wednesday, hurt by lower production, which fell 14 percent to 411,398 PGM ounces.
The news failed to benefit platinum prices. The gold/platinum ratio, which measures the number of platinum ounces needed to buy an ounce of gold, held at 1.15 on Wednesday, close to its highest since 1985.