Gold edged down on Wednesday to just below a seven-week peak hit earlier as a modest rebound in equity markets and lower crude prices more than offset the impact of a weaker dollar.
Spot gold was down 0.3 percent at $1,226.73 an ounce by 1235 GMT. The metal had jumped in earlier trade to $1,238.20, its highest since Oct. 23, having risen as much as 2.8 percent in the previous session on lower share prices and the dollar.
U.S. gold futures were down 0.3 percent at $1,228.20 an ounce, having touched a seven-week high of $1,239 on Tuesday.
"There were a lot of elements that pushed gold prices higher yesterday: very weak stock markets, expectations that India may announce changes in the imports policy within the next few days and a lower dollar," MKS SA head of trading Afshin Nabavi said.
"Although there are no strong drivers and important events today ... maybe we have started to form a floor around the $1,220 area, which could hold for the next few sessions."
The dollar was down 0.1 percent against a basket of currencies.
A weaker U.S. unit makes dollar-denominated assets such as gold cheaper for holders of other currencies.
A modest rebound in European shares after the previous session's losses and a near 2 percent fall in crude oil prices prevented further upside in gold.
An increase in appetite for risk could limit interest towards assets perceived as safer, such as gold, while lower oil prices hurt gold's appeal as a hedge against oil-led inflation.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.37 percent to 721.81 tonnes on Tuesday.
The fund's holdings remain near six-year lows, however, as bullion investors worry that an expected increase in U.S. interest rates could dull demand for the metal.
Gold slumped to a four-and-a-half-year low last month, undermined by a rocketing dollar and positive U.S. economic data.
As a non-interest-bearing asset, gold would have taken a hit from higher rates, but this week's comments from Federal Reserve officials helped calm investor nerves.
In the physical markets, strong demand lifted coin sales to a record for the second straight year, the U.S. Mint said.
Traders were also watching regulatory developments in major consumer India, which could announce changes to import policies, according to a source.
Platinum fell 0.2 percent to $1,242.50 an ounce. Silver was down 0.2 percent at $17.06 an ounce, and palladium gained 0.4 percent to $811.45 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by Dale Hudson and David Clarke)