Gold eased below $1,590 an ounce on Tuesday as concerns over the efficacy of the weekend aid package for Spain's banks and upcoming elections in Greece eroded confidence in the outlook for the euro, and as hopes for fresh US monetary easing faded.
Other commodity prices were also weak, with crude oil falling back towards the year's lows, and base metals like copper and aluminium slipping.
Spot gold was down 0.3 percent at $1,589.70 an ounce at 14:31 SA time, while US gold futures for August delivery were down $5.30 an ounce at $1,591.50.
Prices fell below $1,600 an ounce last week as expectations for a fresh round of potentially dollar-negative quantitative easing in the United States, sparked by very weak jobs data, dissipated.
While rising risk aversion in the euro zone has not tended to boost interest in gold as a haven from risk, signs that the economic crisis is having an impact in the United States have tended to push prices higher.
“Gold is sitting waiting for something to happen, but I would argue it is waiting for something to happen in the United States, rather than Europe,” Natixis analyst Nic Brown said.
“(We need) more clarity in the United States over whether the economic data is going to improve again... or whether the weakening data is a sign of slower economic growth, and that therefore the Fed will have to do something.”
“For me, the focus is definitely on the US side of the Atlantic. In the meantime, gold is going up, down or sideways dependent on what is going on in the euro/dollar rate, and there isn't a great deal else that is moving it around.”
Gold recovered from earlier lows as the euro steadied against the dollar, with selling pressure driven by concerns over Spain's bank bailout easing, but the currency still looked vulnerable ahead of Sunday's Greek election.
European stocks firmed in choppy trade, while Spanish government bond yields rose close to euro-era highs as relief over a bailout for the country's banks turned to concern over how easily it will be able to access debt markets in the longer term.
“The initial euphoria on Sunday night over the 'Spanish rescue' has abated and quite rightly too,” Marex Spectron said in a note. “The markets are back in wait and see mode.”
“We have the Greek election on Sunday and then the FOMC meeting next week. Ahead of these, I'm not going to look for too much apart from the usual thin, nervous moves.”
CHARTISTS SEE SUPPORT
Analysts who study past price moves for clues as to the next direction of trade identified strong support for gold just below current levels. In a note, Societe Generale technical analysts said support at $1,587, and certainly at $1,580, would hold.
Barclays Capital said in a note that it sees near-term support at $1,579, and is neutral on gold in the medium term.
“Selling interest near $1,650 keeps gold within the seasonal mid-year range,” it said. “While $1,520 underpins, we look for a move above $1,700 to signal further upside toward $1,800.”
Among other precious metals, silver was flat at $28.53 an ounce. Silver stockpiles in Comex-monitored warehouses held near their highest since at least 1997 at 143.5 million ounces.
Holdings of silver-backed exchange-traded funds monitored by Reuters rose by 570,000 ounces from June 10 to June 11, Reuters data showed, after an inflow into the Julius Baer Physical Silver fund.
Spot platinum was down 0.3 percent at $1,432.49 an ounce, while spot palladium was down 0.3 percent at $616.22 an ounce.
Platinum prices are failing to benefit from fresh concerns over South African output of the metal, despite Monday's announcement that number four platinum miner Aquarius Platinum would suspend operations at its Marikana joint venture.
“Prices will need to recover to around $2,000 an ounce to justify further investments in the industry and restart suspended operations at the Marikana platinum mine,” investment bank Fairfax said in a note. - Reuters