London, 23 August 2010 - Gold traded at flat-to-lower levels in Europe on Monday, with light turnovers and moderate price movements amid a firmer dollar and continued worries over the health of the global economy. Spot gold was down $1.00 at $1,226.40/1,227.20 per ounce. On the charts, prices have lost upward momentum and, with the stochastics rolling over to the downside, a period of consolidation at lower levels seems likely. Initial support is held around $1,220-$1,218, although a bigger pullback could see prices down to the $1,210 area. Resistance stands at $1,237 and $1,244. The metal hit a seven-week high of $1,237.50 on Thursday, its sixth consecutive multi-week peak, before easing back in the previous session on profit-taking and a strong dollar. Weak equity markets also weighed on prices - some market participants sold off gold positions to cover margin calls, broker ANZ said. "Gold has room for further gains but with every rise the chances of a mild correction will always be there," consultancy Insignia noted. The dollar was steady against the euro at 1.268, close to Friday’s peak at 1.2662 - its best since July 13 - as negative sentiment towards the US economic recovery boosted the currency’s safe-haven qualities. The euro was also undermined by data showing services sector output in the 16-nation eurozone grew at a slower pace in August, slipping to 55.6 from 55.8 in July. European shares were nearly one percent higher, bouncing from a one-month closing low in the previous session. The general focus was on the Australian general election, which failed to deliver a decisive result over the weekend - miners were up on hopes that the 30-percent tax on iron ore and coal mines will be axed if Labour Prime Minister Julia Gillard fails to form a coalition government. The week ahead will see a steady stream of economic data, with EU industrial orders, German IFO business climate, money supply and CPI figures due, while the US has existing home sales, new home sales, preliminary GDP and consumer sentiment numbers, a broker noted. According to the CFTC, speculative financial investors on the gold market increased their net long positions nearly 12 percent or 18,600 contracts in the week ending August 17 - the fourth consecutive weekly increase. "Net long positions of 177,000 contracts are also the highest level since the start of July," broker Commerzbank said. "This shows that financial investors have been a major force in this recent rally of gold prices." The more industrial precious metals continued to suffer from looming doubts over China's demand outlook. Platinum was down $4 to $1,505/1,510 per ounce. "Platinum is hovering around $1,500, an important psychological level," a Japanese trader said. "It has tried but failed to break above this level three or four times so platinum looks vulnerable and quite weak." Elsewhere, palladium was flat at close’s levels of $475/480 per ounce - a bounce to 10-day high of $498 hit on Wednesday seems to have run out of steam and the metal is now looking for a test of support at $469, analyst William Adams at FastMarkets said. Silver, which hit a 10-day low of $17.84 per ounce on Friday, was last at $18.00/18.05 per ounce, up just three cents.

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