Gold slipped 1.7 percent in Europe on Tuesday as the dollar bounced back against the euro after last week's losses, curbing interest in the metal as an alternative asset.
Spot gold was bid at $942.20 an ounce at 0942 GMT (5:42 a.m. EDT), against $957.80 an ounce late on Monday.
Afshin Nabavi, head of trading at MKS Finance in Geneva, said the dollar's recovery was pressuring gold. "Also, the market is shrugging off North Korean testing of short range missiles," he added.
The dollar rose on Tuesday from the five-month lows it hit late last week as investors booking profits on higher-yielding currencies such as the euro.
The euro slipped after industrial new orders in the euro zone fell 0.8 percent in March from February, against expectations for 0.8 percent monthly growth.
Germany also said a record slump in exports and investment had sparked its biggest contraction since reunification in the first quarter. GDP shrank 6.7 percent year-on-year in the first three months of 2009.
A media report questioning the health of the German banking system also prompted traders to trim bets against the dollar. Gold prices took little support from fresh geopolitical tensions, after North Korea launched a second nuclear test.
The dollar index, which measures the U.S. unit's performance against six other currencies, firmed 0.8 percent.
Traders are looking ahead to a spate of U.S. economic data due out later in the session, which could impact the dollar. May consumer confidence numbers are due at 1400 GMT, when Richmond Fed May manufacturing and services indexes will also appear.
"As with other U.S. data, an improvement is expected, but even if our forecast proves correct, with a slight improvement likely, confidence will still languish around historical lows," said Calyon in a note.
The Chicago Fed April national activity index will be released at 1230 GMT (8:30 a.m. EDT).
DOLLAR EYED
Gold exchange-traded fund holdings have firmed a touch, meanwhile, after a period of stability.
On Friday holdings of the world's largest, the SPDR Gold Trust, climbed to a 1,118.76 tonnes from the day before, while holdings of gold ETFs operated by Zurich Cantonal Bank and Julius Baer also rose last week.
"We will be monitoring the inflows into the gold ETF with particular care in the next few days," said UBS analyst John Reade in a note.
