Spot gold was up 0.3 percent at $1,723.89 an ounce at 1502 GMT (10:02 a.m. EST), having earlier fallen as low as $1,709.29 an ounce, while U.S. gold futures for February delivery were up $1.70 at $1,726.60.
A Greek government official said Greece's government is preparing the text of an agreement on a 130 billion euro bailout that will be put to political leaders for approval, suggesting Athens had largely wrapped up talks with lenders on the rescue.
A conclusion to the discussions would likely to support gold, although it has struggled to maintain upward momentum as the markets await more information.
If we do get a resolution of the current standoff, then gold will likely benefit, said Anne-Laure Tremblay, an analyst at BNP Paribas.
The main downside risk lies with failure to reach an agreement between the Greek government and its creditors, which would open the door to a default. Such an event - or market perception that this event will occur - would likely trigger liquidation across asset classes, including gold.
The euro turned positive against the dollar, paring early losses to hit session highs, and Bund futures reversed gains after a Greek official said the government was drafting the bailout deal.
Prime Minister Lucas Papademos negotiated through most of the night with Greece's European Union and IMF lenders, ending at 4 a.m. (0200 GMT) when a 24-hour national strike was about to begin, closing ports and disrupting public transport.
The EU (had) suggested a deal should be reached by 15 February to ensure that the necessary arrangements are made before Greece makes a critical bond payment on March 20, said Standard Bank in a note.
Gold prices are up more than 10 percent so far this year after December's sharp drop, supported by a Federal Reserve pledge to maintain ultra-loose monetary policy.
CHINA HOARDS GOLD
Hong Kong's shipments of gold to mainland China in 2011 more than tripled from a year earlier, confirming China's rapidly growing appetite for bullion, data released by the Hong Kong Census and Statistics bureau showed on Tuesday.
This came even though the gold flow from Hong Kong to China dropped about 62 percent in December on the month to 38,605 kilograms, its lowest level since July.
The 38.6 tonnes shipped ... might be interpreted by some as gold-negative, said UBS in a note. We, however, think the real outliers were shipments in October and November, which... were greatly in excess of previous months' volumes.
And while December's activity is the lowest since July, it's still 245.2 percent higher year-on-year. Here's a statistic that should lay to rest any doubts over Chinese gold consumption: the 2011 trend of imports from Hong Kong was up 258 percent from 2010.
Among other metals, silver was down 0.6 percent at $33.42 an ounce, while spot platinum eased 0.3 percent to $1,618.49 an ounce, and spot palladium was down 1 percent at $695.63 an ounce.
Platinum narrowed its historically unusual discount to gold to less than $100 an ounce on Tuesday, from a record high of around $230 an ounce hit in January.
In a report, BNP Paribas lifted its 2012 and 2013 price forecasts for platinum-group metals, citing threats to output of the metal from South Africa and Russia, the chief producers of platinum and palladium respectively.
We now expect platinum mined output to be flat in 2012, and to rise by 2.5 percent in 2013, it said. Palladium output may contract by 1 percent in 2012 and increase by 2 percent the following year.
Platinum miners say work stoppages linked to safety and industrial action and operational issues such as power outages are curbing their ability to produce the metal.
South Africa's mines minister said on Tuesday that industry chief executives should be held liable for avoidable fatalities, also raising the possibility of court action.