SINGAPORE: Gold edged down on Tuesday as the euro weakened with Spain's surging borrowing costs fuelling worries about Europe's debt crisis, but safe-haven demand may keep a floor under prices.
Sentiment in the euro remained vulnerable ahead of a Spanish debt auction later in the day. Spain is set to see its borrowing costs leap when it sells short-term bonds after jitters over its deficit and banking sector pushed longer term risk premiums above 6 percent on Monday.
Analysts said gold's safe-haven appeal may attract investors again if the situation in Europe worsens.
"We expect that if European credit conditions continue to deteriorate, gold (along with the dollar) could start to better reflect the growing tensions by moving higher on its steam," Ed Meir, an analyst at INTL FCStone, said in a research note.
Spot gold edged down 0.3 percent to $1,646.06 an ounce by 0648 GMT, extending losses to a third straight session. U.S. gold lost 0.1 percent to $1,647.40.
Technical analysis suggested that spot gold could fall to $1,630 an ounce during the day, Reuters market analyst Wang Tao said.
A stronger dollar may cap gains in gold and keep prices in a range, especially as the U.S. economic recovery seems to be on track, said Lynette Tan, an analyst at Phillip Futures in Singapore.
"People may buy into the dollar as a safe haven, which causes some kind of neutral trade in gold," Tan said. "We are looking at gold trade between $1,600 to $1,660."
The dollar index rose to a 1-1/2-week high in the previous session, weighing on dollar-priced commodities as they become more expensive for buyers holding other currencies.
Investors will closely watch a policy meeting at the U.S. Federal Reserve next week, seeking cues on the central bank's attitude towards monetary easing after a weaker-than-expected March employment report released earlier this month fueled hopes for stimulus measures.
Silver stockpiles in COMEX-monitored warehouses rose to their highest level in at least 10 years, showing near-term supply of the metal is plentiful as mine output holds at record levels and the global economic recovery struggles for traction.
Spot silver traded down 0.3 percent to $31.36, off a one-week low of $31.16 hit in the previous session.
Spot platinum lost half a percent to $1,561.44, after hitting $1,556.50 in the previous session, its lowest in more than two months.
Europe accounted for nearly half of the global demand for platinum from autocatalyst production in 2011.
