SINGAPORE: Gold reversed course and edged down on Friday after posting its biggest daily rise in more than three months the previous session, as the euro weakened on mounting worries over the euro zone debt crisis.
The single currency dropped to a four-month low against the dollar as investors fretted about the possibility of Greece's exit from the euro zone and about Spain's banking sector after Moody's downgraded 16 Spanish banks.
Gold eased $1.45 to $1,571.80 an ounce by 0653 GMT, on course for a weekly fall of 0.6 percent - its third losing week in a row.
Gold rallied more than 2 percent on Thursday, its biggest one-day rise since January, supported by a decline in regional U.S. factory activity that fueled hope for more monetary stimulus.
U.S. gold for June delivery edged down 0.2 percent to $1,572.
"We'd like the market to hold at $1,550-$1,560. If it does that, then I think there's a fair chance we could continue higher towards the $1,600 level, perhaps re-establishing the range there," Nick Trevethan, senior metals strategist at ANZ in Singapore.
"But if the headlines out of Europe continue poorly, we may retest the lows," Trevethan said.
Bullion raced to a record of about $1,920 an ounce last September on fear the euro zone crisis could spiral out of control.
But this year, the precious metal is moving in tandem with assets that are perceived to be risky while safe havens, including the dollar and U.S. Treasuries, became more appealing.
JEWELLERS SELL
In the physical market, higher bullion prices prompted selling from jewellers and speculators, but premiums for gold bars were mostly steady at $1.10 to $1.20 to London prices in Singapore. Earlier this week, dealers noted buying interest from Thailand, Indonesia and India.
"I'm so confused in this kind of market. We did buy scraps from Monday to Wednesday, but now we are selling. The market has gone up and down so much," a dealer in Singapore said.
"Thailand is selling gold, and I am not sure what India is doing right now."
Gold demand in top consumer India is likely to moderate in 2012 as higher inflation trims disposable income at a time prices are stubbornly high on a weak rupee, the head of the World Gold Council in the country told Reuters.
Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust, rose 0.17 percent on Thursday from Wednesday, while, that of the largest silver-backed ETF, New York's iShares Silver Trust, climbed 1.08 percent during the same period.
