Gold dipped slightly in quiet trade after touching its highest in nearly four weeks, as a report that Germany could smooth the way for Greece to get a bailout prompted investment in riskier assets.

The Wall Street Journal said Germany was considering dropping its push for an early rescheduling of Greek bonds in order to facilitate a new package of aid loans to prevent Athens from defaulting on its debt.

The report came as Europe has stepped up efforts to draft another bailout package for Greece.

A drop in the dollar did little to whet demand for gold, which usually moves inversely to the U.S. currency, as the improved risk appetite left bullion somewhat sidelined.

Spot gold rose to a session high of $1,540.50, its loftiest since May 4, before pulling back to $1,533.80 an ounce by 1:10 p.m. EDT (1710 GMT), down from $1,537.95 late on Monday. June gold futures lost $1.90 at $1,534.40.

'At least to some degree, the sovereign debt issues with Greece and the other peripheral EU countries have been pretty well documented, so it's not necessarily a surprise for the market,' HSBC analyst James Steel said.

'Gold has been rallying since the middle of May and is actually some 60-odd dollars higher from the recent low, so it hasn't done too badly.'

Gold is down 2.3 per cent so far in May, hovering below a lifetime high around $1,575 touched early in the month.

Although it has been a beneficiary of investor nervousness over Greece, it has struggled to retain gains.

Silver has fallen 20 per cent this month, with platinum down nearly 2.5 per cent and palladium off almost 2 per cent.

The euro hit three-week highs against the dollar. Gold priced in euros -- sometimes used as a gauge to measure investor concern over the euro zone debt crisis of the last year -- fell 0.7 per cent on the day, having touched a record 1,088.11 euros an ounce last week.

Recent increases in risk aversion have translated into greater interest in owning gold, as reflected in last week's net rise in global holdings of the metal in the world's largest exchange-traded funds, the first weekly gain in a month.

Gold holdings are down by more than 500,000 ounces this month and down 0.68 per cent year-to-date, but bullion ETFs have lured more cash in May than other precious metals.

On the futures markets, speculators raised their gold holdings for the first time since mid-April last week, data from the U.S. Commodity Futures Trading Commission showed, bringing futures open interest to its highest since April 19.

Silver rose about 1 per cent to $38.12 an ounce. Despite the day's gains, silver has fallen more than 20 per cent in May -- its biggest monthly decline since August 2008 -- after setting a record $49.51 in April.

Platinum and palladium rose on the day, benefiting from the pick-up in investor appetite for growth-linked assets.

Platinum fetched $1,822.74 an ounce from $1,796.35 previously, while palladium rose near 3 per cent to $775.25. – Reuters