Gold edges lower as worries over Europe simmer

LONDON: Gold eased below $1,590 an ounce on Tuesday as concerns over the efficacy of the weekend aid package for Spain's banks and upcoming elections in Greece eroded confidence in the outlook for the euro, and as hopes for fresh US monetary easing faded.

Other commodity prices were also weak, with crude oil falling back towards the year's lows, and base metals like copper and aluminium slipping.

Spot gold was down 0.4 percent at $1,589.06 an ounce at 0953 GMT, while US gold futures for August delivery were down $6.30 an ounce at $1,590.50.

Prices fell below $1,600 an ounce last week as expectations for a fresh round of potentially dollar-negative quantitative easing in the United States, sparked by very weak jobs data, dissipated.

While rising risk aversion in the euro zone has not tended to boost interest in gold as a haven from risk, signs that the economic crisis is having an impact in the United States have tended to push prices higher.

"Gold is sitting waiting for something to happen, but I would argue it is waiting for something to happen in the United States, rather than Europe," Natixis analyst Nic Brown said.

"(We need) more clarity in the United States over whether the economic data is going to improve again... or whether the weakening data is a sign of slower economic growth, and that therefore the Fed will have to do something."

"For me, the focus is definitely on the US side of the Atlantic. In the meantime, gold is going up, down or sideways dependent on what is going on in the euro/dollar rate, and there isn't a great deal else that is moving it around."

Gold recovered from earlier lows as the euro steadied against the dollar, with selling pressure driven by concerns over Spain's bank bailout easing, but the currency still looked vulnerable ahead of Sunday's Greek election.

European stocks firmed in choppy trade, while Italian and Spanish government bond yields extended their rise as a weekend aid deal for Spanish banks failed to ease fears about the country's ability to fund itself.

"The initial euphoria on Sunday night over the 'Spanish rescue' has abated and quite rightly too," Marex Spectron said in a note. "The markets are back in wait and see mode."

"We have the Greek election on Sunday and then the FOMC meeting next week. Ahead of these, I'm not going to look for too much apart from the usual thin, nervous moves."