Gold prices slipped fractionally Wednesday after posting small overnight gains, as investors sought a safe haven for their money and Asian buyers purchased coins, bars and jewelry.
At one point early Wednesday gold was up 1.18 percent amid a falling U.S. dollar and declining European equities.
Initially, European stocks were being sold off on renewed worries that the continent's sovereign debt crisis has yet to be convincingly solved or even contained after nearly two years. That, along with strong physical buying from India, gave gold a small lift.
But after German Chancellor Angela Merkel suggested that parts of a planned $148.6 billion bailout for Greece could be renegotiated, European stocks began posting mixed gains, with the FTSE 100 and CAC 40 trimming losses and the DAX edging higher.
Safe-haven investments like gold began slipping in overnight Asian and European trading, with interest on the 10-year U.S. Treasury bond hovering around 2 percent.
U.S. stock futures were up, indicating equities will rise at the opening bell.
Fear about whether European leaders will this week finally put a financial fence around the widely expected Greek default and the impulse to use recent gold price declines to enter or expand precious metals positions appeared to be in a standoff.
Some analysts suggested that gold's modest decline Wednesday could amount to the market testing the ability of gold to function as a safe haven, a reputation that the recent selloff has strained.
The only worry is obviously how burnt investors have become of this 20 percent correction, as something which was perceived to be safe suddenly was not any more, Saxo Bank senior manager Ole Hansen told Reuters.
The downside may need to be tested and rejected one more time in order to give bulls enough confidence to re-enter, he added. Strong physical demand should helped the market to find support relatively soon.
Gold on the Comex was off fractionally, a mere $5.40, to $1,647.10, while gold for immediate delivery was up $2.95 to $1,649.09.
Silver on the Comex slipped 26 cents to $31.28, while silver for immediate delivery was up 24 cents to $31.41.