Gold eased on Wednesday, having fallen for the past three trading days, as the euro came under pressure from continued worries about the euro zone.
Across the broader markets, European shares fell along with the euro, while safe-haven Bund yields were steady on the day, as investors weighed up the impact of the ongoing debt crisis on regional growth, while Germany sold new two-year bonds for a record-low yield.
Spot gold was down 0.35 percent at $1,643.71 an ounce at 1130 GMT, having lost 1.5 percent in value over the previous three trading days.
From my point of view, we have to see a good shakeout towards the downside first, perhaps to break $1,600, or even lower than that and after that we will probably head back up again, Afshin Nabavi, head of trading at MKS Finance said.
We are seeing very little demand from the physical dealers, very little demand from the investors, it's pretty much come to a standstill and I think we have to come off (in price), he added.
Gold traded in a tight band on Wednesday, leaving the spread between the session high and low at just $8.7 an ounce, the narrowest since the end of last year.
The nervousness around the euro zone has eased a bit, which could help stabilise the euro and support gold prices, said Shanghai CIFCO Futures analyst Li Ning.
But Li added that market sentiment remained cautious ahead of the U.S. Federal Reserve's meeting of its policy-setting Federal Open Market Committee (FOMC) next week, after comments from the Fed over recent weeks have caused sharp price fluctuations.
Adding to the cautious tone were lingering concerns about Spain's finances. Although Spain managed to exceed the target at Tuesday's debt auction, it was forced to pay a stiff premium compared with a month earlier, boding ill for a key long-term debt sale on Thursday.
In terms of investment demand, shorter-term speculators in U.S. gold futures have cut their exposure to the metal to their lowest in a month, while flows of gold in and out of exchange-traded products (ETPs) have virtually stagnated over the past two months.
Options on shares in the SPDR Gold Trust, the world's largest gold-backed ETP show investors are betting on a rising underlying gold price.
SPDR Gold Trust options maturing this Friday show most open interest is gathered in call options, which give the owner the right, but not the obligation, to buy shares in the trust at a pre-set price, at a strike price of 165.0 a share, which equates to an underlying spot gold price of $1,699 an ounce.
Based on combined open interest in SPDR calls and puts, the largest bet investors are taking are on shares moving to 160.0 a share by Friday, which is equivalent of a spot gold price of roughly $1,648 an ounce, which highlights some of the lack of any strong investor conviction in gold right now.
Gold price action has become stale, with conviction in either direction remaining remarkably low. The yellow metal could certainly use fresh catalysts from external markets at this stage to shake it out of this stupor, Edel Tully, a strategist at UBS said.
But until there is a clear sign as to whether it is taking on a safe-haven or a risk persona, investors are likely to continue keeping participation small and timelines brief. Instead, it's quite likely that gold will wait and take its next directional cue from the FOMC meeting next week.
Buying interest in Asia's physical market was muted, even as a key gold-buying festival in India looms on the horizon.
People won't want to commit too much at this point, said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers in Hong Kong. There is some buying when prices fall to the $1,630-$1,640 level, but the volume shrinks when prices rebound to $1,660-$1,670.
Leung said gold bar premiums in Hong Kong were stable at $1.10-$1.60 per ounce above London prices.
For all the absence of conviction in the gold market at present and the 1.3 percent fall in price in April, gold has outperformed both silver and platinum so far this month.
Of the four precious metals, platinum has fallen the most in April, having lost nearly 3.5 percent in value to trade at a discount of almost $70 an ounce to gold, after having traded at a premium of nearly $30 a month ago.
Spot platinum was up 0.1 percent on the day at $1,578.20 an ounce, while palladium, which has performed the strongest out of the precious complex in April, with a 1 percent rally, was down 0.2 percent at $657.20 an ounce.