The price of gold was firm near its three-month high Wednesday morning amid hopes that the European Central Bank will take steps to reduce borrowing costs for Spain and Italy.

Yesterday, gold extended its three-month high as the dollar weakened while the euro strengthened on optimism over the euro zone debt problem with expectations that the European Central Bank would step up efforts to prop-up the weaker economies of the single currency bloc.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved up to 1,278.96 tons from 1,274.74 tons.

Meanwhile, the U.S. dollar was lingering near a two-month low versus the euro and the Swiss franc, while slipping back near a three-month low against sterling. The buck was hovering around a 5-week high versus the yen.

A slight decrease was recorded after the data on the level of sales in the secondary market, which increased compared to the previous month, but were below analysts' expectations.

The cost of the August gold futures on the COMEX is now 1639.3 dollars per ounce.