Gold prices hovered in a tight range Wednesday as strong physical buying and a weaker dollar offset renewed optimism among stock investors that Europe might yet avert a sovereign debt-induced recession.

Late Tuesday a report disclosed that European finance ministers were working on ways of cooperating to protect banks exposed to Greek government debt and the debt of other weak Eurozone members.

There is an increasingly shared view that we need a concerted, coordinated approach in Europe while many of the elements are done in the member states, Olli Rehn, European commissioner for economic affairs, told the Financial Times. There is a sense of urgency among ministers and we need to move on.

Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty, Rehn said. This should be regarded as an integral part of the EU's comprehensive strategy to restore confidence and overcome the crisis.

The report energized U.S. stocks, which swung from a 1.8 percent decline to a 2.3 percent gain on the news. That rally was picked up early Wednesday by European exchanges, where major indexes were posting big gains.

Despite the rush into stocks, gold prices -- which were down on hints from Federal Reserve Chairman Ben Bernanke that the central bank might again intervene to boost business activity -- overnight hovered within a tight $40 range.

Physical demand has been reinvigorated at these price levels and should provide support for prices, before investment demand and safe haven interest returns to the driving seat, Suki Cooper of Barclays Capital said in a client note.

The greenback fell 0.64 percent on the U.S. ICE Dollar Index.

Gold for December delivery slipped 79 cents to $1,615.30, while gold for immediate delivery retreated $7.35 to $1,615.38.

Silver for December delivery gave up 63 cents to $29.21, while silver for immediate delivery was off 62 cents to $29.24.