While keeping an eye on mounting geopolitical tensions, investors were also awaiting minutes of the Federal Reserve's July meeting for clues about the U.S. central bank's monetary policy outlook.
Spot gold was little changed at $1,295.44 an ounce by 0643 GMT, after dropping 1.3 percent in the last three sessions. U.S. gold was steady at $1,297.
"Robust housing reports out of the United States were important, as the stronger numbers should dispel concern that the sector is starting to slow, as was the conventional view for the past few weeks," said INTL FCStone analyst Edward Meir.
The data may leave the room open for an uptick in rates and strong dollar, both of which should be bearish for gold over the short term, Meir said.
U.S. housing starts surged to an eight-month high in July, suggesting the nation's housing market recovery was back on track after stalling in the second half of last year.
Investors are keenly watching U.S. economic data to gauge the Fed's outlook on interest rates. Higher rates would dim the appeal on non-interest bearing assets such as gold.
Among other precious metals, platinum was holding up on Wednesday after a seven-day losing streak though it continued to trade near a two-month low.
Silver was also near a two-month low, while palladium was holding just below a 13-year high.
Geopolitical tensions continued to support gold by keeping losses in check. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 1.5 tonnes to 799.19 tonnes on Tuesday.
A gun battle broke out in the centre of the rebel-held Ukrainian city of Donetsk and residents ran for cover from artillery fire on Tuesday, taking a government military offensive into the heart of the retreating pro-Moscow separatist rebellion.
A ceasefire in the Gaza Strip collapsed on Tuesday, with Palestinian militants firing dozens of rockets at Israel and Israel launching air strikes.
Gold prices have risen 7.5 percent this year largely on geopolitical tensions. Physical demand has been hit by the price gain, with major buyers China and India staying on the sidelines for lower prices.