Gold prices edged down on Wednesday as the euro lost some of its gains from the previous day, when reports of a possible European bailout for debt-stricken Greece lifted the single currency and helped risk aversion to recede.
The euro fell after marking its best day of gains since November on Tuesday, sapping the allure of gold, with investors keen to see details of a rescue package for Greece and how it
could impact the euro zone economy.
Concerns about Greece's public finances and potential contagion effects have hit the euro and soured risk appetite in recent weeks. European Union leaders will hold a special summit
on the European economy on Thursday.
Spot gold [GCC1 1074.7001 -1.9999 (-0.19%) ] was at $1,075.35 per ounce as of 0327 GMT,
down 0.2 percent from New York's notional close of $1,076.95, and off Tuesday's high of $1,083.05.
U.S. gold futures for April delivery edged down 0.1 percent to $1,076.20 per ounce after rising $11 the previous day on the COMEX division of the New York Mercantile Exchange.
On Friday, spot gold fell as low as $1,043.75, its lowest since Nov. 2, as the euro fell on fears over the outlook for some euro zone economies.
"On the surface, the currency market is a main driver for now in the gold market and causing ups and downs in prices," said Yuki Sonoda, an adviser at Daiichi Commodities Co in Tokyo.
"But what people really want to know is the fate of proposed regulations on U.S. banks, because that will determine money flows of risk-taking funds, and whether or not President Obama will make compromises and how," he said, referring to stalled financial regulatory reform plans.
President Barack Obama last month unveiled proposals to limit risk taking by restricting some banks' most lucrative operations, which he blamed for helping to cause the financial crisis.
Imposing tighter regulations on U.S. banks as proposed could send gold well below $1,000 per ounce, Sonoda said.
But if the banking reform plan follows the same course as Obama's healthcare proposals, in which he has shown willingness to compromise, it could send gold back to $1,200, Sonoda said.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust [GLD 105.41 1.37 (+1.32%) ] said its holdings were at 1,106.378 tonnes as of Feb. 9, unchanged for the second straight day.
