German Chancellor Angela Merkel and French President Nicolas Sarkozy, the leaders of Europe's two biggest economies said Greece will stay in euro zone.

Positive sentiments also flowed after U.S. Treasury Secretary Timothy F. Geithner said "there is no chance that the major countries of Europe will let their institutions be at risk in the eyes of the market."

Euro have been relieved for now, but more headwinds can be expected.

Recent optimism have diverted the minds of investors from gold temporarily.

At the Multi Commodity Exchange, gold for delivery in October opened at Rs 28,118 per 10 grams, and was trading in the range of Rs 27,976 – Rs 27,981 per 10 grams around 11:44 am IST.

Similarly, the metal for April contract delivery opened high at Rs 28,900 per 10 grams, then started declining and was trading in the range of Rs 28,825 – Rs 28,866 per 10 grams.

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