Gold rose early on Wednesday after the previous session's drop from record highs, as investors focused on economic uncertainty despite progress in talks on raising the US debt limit and ahead of a eurozone summit aimed at resolving the region's debt crisis.
Gold is about 1 percent below its record high of $1,609.51 a day after the metal snapped an 11-day winning streak, the longest in four decades, as safe-haven demand faded after President Barack Obama supported a bipartisan proposal for a new deficit-reduction plan to avert a US default.
Spot gold was up 0.5 percent at $1,596.56 an ounce by 11:22 am EDT (1522 GMT).
Bullion has gained around 6 percent this month due to uncertainty over whether politicians will reach a deal to raise the $14.3 trillion US borrowing limit before an August 2 deadline.
US gold futures for August delivery were down $3.80 an ounce at $1,597.30, reflecting Tuesday's decline after the contract's settlement.
Latest exchange data showed US gold futures' open interest, a gauge of market liquidity, rose 2 percent to top 540,000 lots on Monday, the highest since January.
"We may see some profit-taking in the next few days due to the combination of optimism on the US fiscal front and more progress on the European front at Thursday's summit," said Bart Melek, director of commodities, rates research and strategy with TD Bank Financial Group.
French ministers said on Wednesday Europe's leaders are less divided than some media have suggested ahead of Thursday's summit on the eurozone debt crisis and are likely to reach an accord that will relieve Greece's woes.
The European Union was said to be considering enabling the eurozone bailout fund to recapitalize banks, according to reports. The news boosted the euro and weakened gold's safe-haven appeal. Gold also remained under pressure after some concerns eased over the threat of a US default.
"The preliminary (talks) on the US debt ceiling look promising and clearly that has taken some risk off the table in terms of appetite for gold," said Robin Bhar, an analyst at Credit Agricole.
Silver was up 1.2 percent at $39.42 an ounce. Platinum group metals also rose, with platinum up 0.5 percent at $1,772.00 an ounce, while palladium was up 0.8 percent at $791.47 an ounce.