Gold continued to face resistance on highs above $1740 per ounce as traders remained on sidelines ahead of critical event risks coming from Eurozone developments. Euro lingered around 1.3400 against the US dollar in a quite session today. European equities opened on a mostly positive note ahead of a key meeting of the EU policymakers amid expectations that the European Central Bank (ECB) is due to cut its key lending rate by 25 basis points. The ECB is also expected announce additional liquidity measures given the persistent fears on the Eurozone debt impasse and shrinking economic activity. Clearing firm LCH.Clearnet has lowered the margin it requires traders to deposit to trade Italian government bonds, partly reversing a November rise. In a notice on its website dated Wednesday, the firm said the margin on Italian bonds was lowered, with the deposit required for bonds maturing in 7 to 10 years reduced to 8.15% from 11.65%. Italian bond yields have fallen sharply since pushing well above 7% in November The Italian austerity plan outlined by Prime Minister Mario Monti this week eases near-term pressure on the country's credit rating, the global ratings agency Fitch said today. Fitch said its outlook on the country's A-plus rating remains negative, however, reflecting the need for Italy to deliver growth-enhancing structural reforms, and to show that it still has access to the bond market ahead of next year's heavy redemptions. The US dollar has gained further in the afternoon moves as the ECB interest rate decision approached and currently quotes at 1.3384 against the Euro. The currency had gained yesterday as reports trickled in stating that the Eurozone summit is unlikely to see a major coordinated move from the policymakers. The greenback had dropped earlier in the week on reports that Eurozone official talks are focusing on the possibility of allowing the euro-zone's 440 billion euros ($590 billion) bailout fund to remain in operation when a new €500 billion facility comes into force in 2012. European leaders are due to meet in Brussels today for a two-day summit billed as crucial for the debt-stricken region. German Chancellor Angela Merkel and French President Nicolas Sarkozy have proposed broad treaty changes that would toughen fiscal rules and impose automatic sanctions on countries that violate budget limits. In last week of November, the Organization for Economic Cooperation and Development had state that the European Central Bank should loosen monetary policy again and may need to devise more radical nonstandard measures to save the euro-zone economy. COMEX Gold is quoting at $1743.20, down $1.60 per ounce. Earlier in the week, a new study released by the World Gold Council (WGC) stated that Gold has a strategic diversifying role roughly comparable to risky assets such as small caps and emerging markets over the long term. Gold does not appear to be a substitute for other assets but seems to add significant diversifying power due to its low or negative correlation with most other asset classes in an optimized portfolio context, the study noted. MCX Gold futures for February 2012 are quoting at Rs. 29135, up Rs. 68 or 0.23% on the day. Prices could test highs near Rs. 29400 in the evening moves. Shorts would open up only on a break under Rs. 29200.

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