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Gold slides on flat dollar as investors eye Greek debt talks

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Gold slipped on Wednesday as the dollar paused for breath after sharp gains and caution prevailed in financial markets ahead of a meeting of finance ministers that is set to discuss Greece's future in the euro zone.

Uncertainty over whether a compromise could be found to avoid Greece's exit from the euro zone could lift retail demand for the metal, often seen as an insurance against risk.

Spot prices are however down nearly 4 percent so far this month as the strong dollar and expectations of an interest rate rise in the United States weighed on investor sentiment.

Spot gold was at $1,230.50 an ounce, bouncing back a bit from a three-week low of $1,228.25 hit last week.

U.S. gold for April delivery edged up $2.00 to $1,234.10 an ounce.

"There has been some retail demand driven by the situation in Europe from the end of December," Natixis analyst Bernard Dahdah said.

"That said, prices are flat and people are possibly not expecting a breakthrough from this week's meetings," he added. "The big story for gold is going to be the interest rates in the U.S. and the hawkishness of some Fed officials."

The dollar was flat against the euro as Greek Finance Minister Yanis Varoufakis attends his first meeting of euro zone finance ministers where he will spell out plans to drop his country's bailout and end austerity.

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He will seek a "bridge agreement" to buy time until June for a full settlement, but officials are already downplaying the chance of a breakthrough.

The meeting of finance ministers on Wednesday will be followed by a summit of European Union leaders on Thursday.

European stock markets fell on a lower appetite for risk and as traders also eyed comments from Federal Reserve officials on the timing of any rate increase.

The Fed should raise interest rates in June, a top Fed official said on Tuesday, saying the U.S. economy is strengthening and inflation will move back to the central bank's target.

Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could further strengthen the dollar and in turn hurt demand for bullion, a non-interest-bearing asset.

Spot silver was down 0.2 percent at $16.86 an ounce. Palladium was up 0.1 percent at $768.75 an ounce, while platinum rose 0.1 percent to $1,205.50 an ounce.