Gold prices buckled on Friday in Europe, dipping to their lowest in three months as the market succumbed to dollar strength against the euro, dealers said. "This lurch down is a bit of a surprise as physical business is very good," a dealer said. "But the investment funds have been quite long and with the dollar quote rampant here they have been getting out," he added. Spot gold slid to $417.10/417.80 per troy ounce by 1459 GMT after touching a low of $416.40 last seen on February 11. That compared with $420.30/421.00 quoted late on Thursday in New York. The dollar rallied to fresh highs for the year against the euro as the single currency's technical support levels gave way to bullish sentiment on the dollar.
In the year to date, the euro has now fallen over seven percent against the dollar, making dollar-priced gold more expensive for non-US investors.
SGCIB economist Stephen Briggs said a move by gold towards this year's lows ($410.40) could be looming but further dollar strength would be needed to see that.
"The $410, $411 area is going to be the target but there are indications that physical demand is quite good at these levels," he said.
The dealer said physical demand at the lower levels should help the market to claw up once a floor had been found.
"I'm still pretty bullish - I think that eventually this is quite a healthy market," he added.
Paul Merrick, vice-president of commodities at RBC Capital Markets said he still had a positive outlook for gold, which hit a 16-1/2-year peak last December at $456.75.
In other metals, silver dropped back with gold to $6.94/6.97 from $7.09/7.12 late in New York on Thursday.
Silver had seen a fairly significant run higher, hitting $7.21 earlier this week with funds keen on playing the gold silver ratio.
Lending activity had also supported the market, dealers said.
Platinum eased to $860.00/865.00, while palladium stood at $186.00/190.00 from $187.00/190.00.
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