Gold slipped more than 2 percent in Europe on Tuesday, extending the previous session's losses, as the dollar strengthened to a fresh three-week high against the euro, denting the metal's appeal as a currency hedge. Platinum and palladium were little changed after poor sales figures from automakers, the major buyers of the metals, as the bad demand news was largely priced in, analysts said. Spot gold was quoted at $843.00/845.00 an ounce at 1053 GMT, down from $858.90 late in New York on Monday but off its earlier low of $838.55. U.S. gold futures for February delivery GCG9 on the COMEX division of the New York Mercantile Exchange were down $13.70 at $844.10. "The strong dollar is dampening precious metals prices," said Commerzbank analyst Eugen Weinberg. The U.S. currency extended gains against the euro after a flash estimate of euro zone inflation data came in weaker than expected, increasing pressure on the European Central Bank to cut interest rates. [ID:nL6511576] Analysts said the prospect of an ECB rate cut at the bank's next interest rate meeting on Jan. 15 is pressuring the single currency, and consequently gold. [ID:nL6532861] A firm dollar reduces gold's appeal as an alternative investment. But while the stronger dollar and reports of lacklustre jewellery sales weighed on prices, demand for the metal from exchange-traded funds -- which issue securities backed by stocks of physical gold -- remains firm. ETF Securities, which operates Europe's largest gold-backed ETF, said holdings of its Physical Gold exchange-traded commodity PHAU.L rose 2 percent in the week to January 2 to 1.899 million ounces. [ID:nL6502191] Holdings of the world's largest bullion ETF, the SPDR Gold Trust GLD, held at a record 780.23 tonnes on Monday. "Gold is holding (where it is) because of investment demand for gold ETFs, rather than demand from the physical side or as a hedge against the U.S. dollar," said Weinberg. Firmer oil prices, which are holding just below $50 a barrel as supply fears were fuelled by Israel's incursion into Gaza and a dispute between Russia and Ukraine over natural gas, also lent some support to gold. [ID:nSIN367919] CAR SALES SLUMP Among other precious metals, platinum and palladium were little changed despite the spate of poor sales numbers from U.S. and other carmakers. Toyota said on Tuesday it would shut all its factories in Japan for 11 days to combat a fall in demand. The global industry leader posted a 37 percent sales drop in December. [ID:nT158] In the United States, data showed auto sales fell 36 percent in December, to close out the weakest year since 1992 in the world's biggest car market. [ID:nL5118725] However, the news was in line with expectations. Fears over falling demand from carmakers, which consume around half of the world's platinum supply, have already knocked prices of the white metal down some 60 percent since March. The market has steadied over the last month, however. "While platinum will track the moves of both gold and the dollar the metal appears steady after breaking out of the previous $780-880 range," said James Moore, an analyst with TheBullionDesk.com. Spot platinum was quoted at $941/946 an ounce, against $946 late in New York on Monday, while palladium was little changed at $183/188 an ounce from $183.50. Spot silver eased to $10.84/10.92 an ounce from $11.22.

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