Gold inched lower on Wednesday as investors awaited the outcome of the US Federal Reserve's policy meeting, which could weigh on the dollar, but purchases from jewelers prevented prices from falling further.
The Fed, which will start a new practice of announcing policymakers' interest-rate projections, will probably conclude the meeting with a signal that interest rates will be held near zero into 2014, according to a Reuters poll.
Any signs that interest rates will stay lower for longer could put pressure on the dollar, and boost gold's safe haven appeal, and prices. A weaker dollar would also make gold more attractive to buy for investors holding other currencies.
Gold lost $1.26 an ounce to $1,664.34 an ounce by 0322 GMT, but was off an intraday low of around $1,664 an ounce. Gold hit a 6-week high of $1,681.16 on Monday.
Volumes remained thin during China's week-long Lunar New Year holiday.
"We've seen light buying from Indonesia, but we are still in a holiday mood. It looks like people will prefer to buy on dips. Premiums for gold bars are steady at $1," said a physical dealer in Singapore, who also trades with main consumer India.
"There's not much on silver, but we will still get demand from India or Thailand. We can't say if the demand is exceptionally good."
Silver was steady at $32.11 an ounce. It rallied to $32.76 an ounce on Monday, its strongest since early December.
Gold largely tracked the fortunes of the euro in the last two months of 2011, losing some of its safe haven appeal even as investors questioned the viability of the single currency. Gold fell by more than 10 percent in December.
The euro fared reasonably well against the dollar on Wednesday after EU data showing a surprising strength in manufacturing and services this month held out hope that the euro zone may escape recession.
Greece kept hopes alive for a last-minute bond swap deal to avoid a messy default after euro zone officials sent talks back to square one by rejecting a final offer from the country's private bondholders.
But the International Monetary Fund said Europe's debt crisis could tip the world economy into recession and a bigger firewall is urgently needed to keep the damage from spreading.
US February gold hardly moved around $1,665.3 an ounce.
"After failing to crack the upside earlier this week, there is a chance it could take a look at support. We think that should hold. Indian and Thai investors are buying physical material towards the bottom of the range," ANZ said in a report.
"This pattern may well continue for the rest of the week, with prices likely to trade towards the top of the band, and possibly through it, once Chinese markets reopen next week."
Some Asian markets reopened on Wednesday but China and Hong Kong remained closed for the Lunar New Year holiday.
In other markets, Asian shares rose on Wednesday, underpinned by strong earnings from US technology giant Apple, stabilizing European money markets and falling euro zone debt yields, with investors shifting their focus to the Fed from Europe.
Precious metals prices 0322 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1664.34 -1.26 -0.08 6.43
Spot Silver 32.13 0.12 +0.37 16.03
Spot Platinum 1542.49 -2.25 -0.15 10.73
Spot Palladium 677.50 0.50 +0.07 3.83
COMEX GOLD FEB2 1665.40 0.90 +0.05 6.29 4838
COMEX SILVER MAR2 32.13 0.16 +0.48 15.10 843
COMEX gold and silver contracts show the most active months.