The ECB is expected to hold interest rates unchanged, but economists have mixed views on the chances of a rate cut in the next few months due to a murky economic outlook.

Central banks' monetary stimulus was a key driver behind gold's twelfth year of annual gains in 2012, as investors concerned about the side effects of rampant cash printing fled to bullion to hedge against inflation.

Gold has been moving in a narrow range of about $25 this week, with the upside capped by signs that the United States might end its easy money policy. Physical buying in Asia has helped support prices above $1,640 an ounce.

Gold dropped to a more than four-month low below $1,630 an ounce last week after minutes from the US Federal Reserve's last meeting showed officials were concerned about the side effects of its bond buying programme.

"The market got a little concerned about how aggressive the Fed will be," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong, adding that the market is expected to rebound.

SocGen expected gold to average $1,700 an ounce in the first quarter of the year, as well as in 2013.

Spot gold was little changed at $1,656.44 an ounce by 0307 GMT, below the key resistance of the 200-day moving average at $1.661.05.

US gold traded nearly flat at $1,656.50 an ounce.

Technical analysis suggested that spot gold could retrace to $1,642.14 an ounce during the day, said Reuters market analyst Wang Tao.

The dollar index inched higher, on course for its third day of gains. A stronger greenback makes dollar-priced commodities less affordable for buyers holding other currencies.

Center>Copyright Reuters, 2013