Gold prices held steady, shrugging off the downgrade of Spain's sovereign credit rating, as investors wait for clarity on Europe's plans to tackle the debt crisis at this weekend's European Union summit.
Moody's cut Spain's sovereign ratings by two notches, citing high levels of debt in the banking system and corporate sector, after it cast doubt on France's triple-A rating earlier this week.
France and Germany were reported to have reached an agreement to boost a euro zone financial rescue fund to two trillion euros, as European leaders have been pressured to come up with a definitive solution to the debt crisis at the meeting this weekend.
"Gold has nowhere to go unless there is clarity on what Europe wants to do," said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers in Hong Kong.
Leung and other dealers said the price dip in the previous session to below $US1630 attracted a wave of physical buying, but demand eased as prices rebound.
Spot gold edged up 0.2 per cent to $US1662.55 an ounce, recovering from $US1626.34 hit in the previous session, its lowest in nearly two weeks.
US gold gained 0.7 per cent to $US1664.60.
Technical analysis suggested that spot gold has turned neutral as the sharp rise from Tuesday's trough of $US1626.34 has violated a short-term downtrend, said Reuters market analyst Wang Tao.
Spot gold has been trading in a range roughly between $US1600 and $US1700 this month.
Open interest in US gold futures and options stood near its lowest level since late July, as investment interest languished, data from the US futures regulator showed.
"At the moment it's just a traders' market rather than an investors' market," said a Singapore-based trader.
"It goes 20 bucks one way and 20 bucks the other way, then we are unchanged. It lacks a main driver."
The difficulty in funding and market turbulence caused by the euro zone's debt crisis have forced investors to the sidelines.
"Effectual interest rates have to be lower and the market has to turn stable - these two are needed to get gold to return to the upward trending market that everyone loved so much," he said.
