SINGAPORE: Gold drifted lower on Monday after posting its biggest quarterly rise in more than two years, tracking a weaker euro as Spain's struggle to control its finances worried investors. Caution has returned to the market after central banks' stimulus measures cheered gold bugs and sent bullion up for four straight months. Investors are now seeking fresh catalysts amid the still-grim picture in the euro zone. Spain's debt levels are set to rise next year, piling pressure on the government to apply for aid as it pours funds into cash-strapped regions, an ailing banking system and rising refinancing costs, its budget showed on Saturday. The euro fell to its lowest in nearly three weeks on uncertainty over Spain's bailout plan, while the dollar index climbed to its highest since mid-September, making dollar-priced gold less attractive to buyers holding other currencies. "In the short term, the weaker euro/dollar does have an impact on gold prices," said Dominic Schnider, an analyst at UBS Wealth Management in Singapore. "While structural change in Europe will take years, the short-term solution to the debt crisis is money-printing, which will support gold." Dollar-priced gold closed last week barely changed, despite a 0.8-per cent rise in the dollar index, showing bullion's resilience, he said. Euro-priced gold hit a record high of 1,381.15 euros an ounce last Friday. Spot gold had inched down 0.3 per cent to $1,766.10 an ounce by 0658 GMT, after finishing the last quarter up nearly 11 per cent, its biggest quarterly rise since the second quarter of 2010. US gold fell 0.3 per cent to $1,768.50. China's economy offered more evidence of a seventh straight quarter of slowing growth on Monday, with an official survey of factory managers remaining in contractionary territory for a second successive month. That weighed on risk appetite, but also further fuelled expectations of more stimulus measures in the nation, which rivals India as the world's top consumer of gold. A few key markets in the region, including China and Hong Kong, are shut for public holidays. China will remain closed for the rest of the week. Oil and base metals also weakened as growth worries took centre stage, while investors await a further round of purchasing managers index data from the euro zone nations and United States to better gauge the global economy. "China's slowdown is the prevailing theme out there and of course Europe is always an overhang, but there are only brief spurts of volatility then interest wanes again," said a Hong Kong-based trader.

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