Gold falls in Europe

Gold eased 1 percent on Tuesday, giving up some of the previous day's gains, as stocks and the euro were pressured by waning optimism over a new plan to tackle eurozone debt, and ahead of a vote in Slovakia to ratify changes to the bloc's rescue fund. Spot gold was down 0.6 percent at $1,664.69 an ounce at 1337 GMT. The metal rose more than 2 percent on Monday, helped by a retreat in the dollar, weakness in which, among other things, makes gold cheaper for other currency holders.
The precious metal is still seeing good physical demand at lower prices, particularly from major buyers China and India, but it has struggled to gain traction as prices rise. "We've seen some good buying out of Asia in the last couple of days, with the Chinese back from their holiday," said Credit Suisse analyst Tom Kendall. Three of the four parties in the right-of-centre government want to push through the mechanism aimed at preventing the Greek debt crisis from spiralling out of control, but a fourth has threatened to vote against it.
"Intraday, gold most of the time tracks currency moves. We're seeing the euro under a bit of pressure today, which is dragging down gold," said Standard Bank analyst Walter de Wet. "But we think if you take a six- to 12-month view, gold will continue to trade inversely with risk, especially if it is driven by credit issues. If the solution seems biased towards creating more liquidity, that should push gold higher."
US gold futures for December delivery were down $3.90 an ounce at $1,666.90. Demand for physical gold, which picked up considerably as prices fell more than 20 percent from last month's record highs above $1,920 an ounce, is continuing to support the precious metal, with Asian buyers particularly active in the market. Premiums for gold bars in Hong Kong stood at around $3 an ounce, their highest level since at least February, while the premium in Tokyo held at 50 cents, dealers said.
Seasonal buying, particularly in main consumer India ahead of the Diwali festival of lights on October 26, should underpin gold prices, Swiss bank UBS said in a note. Doubts remained over the metal's ability to recreate the stellar gains recorded earlier in the year, however. Prices remain up 17 percent since the end of December despite September's retracement, their sharpest monthly drop in nearly three years.
Societe Generale said it remains broadly bullish on the outlook for gold despite the recent retrenchment in its prices, but lowered its 2012 price forecast for the metal. The bank now expects the 2012 gold price to average $2,175 per ounce, down from its previous outlook of $2,275 per ounce. The precious metal has averaged around $1,540 an ounce so far this year, Reuters data showed.
Among other precious metals, silver was down 0.7 percent at $31.82 an ounce. The gold:silver ratio - the number of silver ounces needed to buy an ounce of gold - steadied at around 52.5 on Tuesday, off last week's high of 54.6. Spot platinum was down 0.2 percent at $1,513.99 an ounce, while spot palladium was down 1.1 percent at $603.75 an ounce.