LONDON/NEW YORK: Gold prices were slightly lower on Monday afternoon, giving back some earlier gains after the euro slipped into negative territory versus the dollar in US holiday-thinned trade, but the precious metal held above $1,575 an ounce as investors bet last week's price drop had been overdone.
Gold is down more than 5 percent so far in May and is vulnerable to fresh losses in the euro. Lingering concerns over sluggish growth in the euro zone and the health of Spanish banks mean the unit is also on track to fall 5 percent this month.
Spot gold was at $1,570.96 an ounce at 1:46 p.m. EDT (1746 GMT), down $2.59 or 0.6 percent.
Bullion had traded in positive territory most of the day, hitting an intraday high of $1,583.50 earlier, but eased into the red on a weaker euro. The precious metal fell 1.1 percent last week.
Afshin Nabavi, head of trading at MKS Finance in Geneva, said some buyers had been tempted back by its dip towards $1,525. "I was among the ones looking for a deeper correction," he said. "But $1,525 now looks to be rather solid."
"It could be a rangebound week, but my guess is that after the US nonfarm payrolls data on Friday, gold may very well break above $1,600."
Gold remains firmly tied to the currency markets, climbing earlier in the day after opinion polls ahead of next month's Greek elections showed pro-bailout conservatives in the lead, lifting the euro on hopes Greece may stay in the euro zone.
The news boosted assets seen as higher-risk across the board, but European shares later pared gains on fears over the outlook for Spanish banks, while oil prices also came off highs.
The bond markets pointed to ongoing worries over euro zone debt, with the premium investors require to hold Spanish government bonds over their German counterparts earlier on Monday hitting its highest level since the euro was launched.
Without the support lent to the market last year by safe-haven demand linked to the euro zone debt crisis, prices will struggle in the near term.
"It feels as though there is plenty of scope later this year for the focus to move from the European fiscal situation to the US fiscal situation. That has the potential to be supportive for gold prices," said Natixis analyst Nic Brown.
"But I would have to say that apart from that, the outlook doesn't look particularly good."
LEAN TIMES FOR INDIAN DEMAND
Physical demand for the metal in India, its biggest global consumer, remained depressed by the weak rupee and seasonal factors.
"We are heading towards a seasonally weak demand period," said Babu Alapatt, managing director at retailer Alapatt Gold Pvt Ltd in the southern state of Kerala. "The wedding season is coming to an end and the monsoon is approaching."
Meanwhile, data from the US Commodity Futures Trading Commission showed that in the week ended May 22, speculators cut net bullish bets on US gold to the lowest level since December 2008 as the rise in short positions outpaced the uptick in longs.
Among other precious metals, silver was down 0.49 percent at $28.36 an ounce. Silver has underperformed gold this month, on track to decline 7.6 percent after falling to its lowest price this year at $26.73.
Holdings of silver-backed exchange-traded funds were at a one-month high on Friday, Reuters data showed, at 489.3 million ounces, though they remain around 7 percent below the record high they hit in April 2011.
Spot platinum was up 0.39 percent at $1,432.05 an ounce, while palladium was up 2.57 percent at $601.82.
The gold/platinum ratio, which measures the number of platinum ounces needed to buy an ounce of gold, held at its highest level since early January on Monday.
"Within the precious metals complex, gold continues to outperform relative to silver and the platinum group metals," Deutsche Bank said in a note.
"We expect this trend to continue in an environment where downside risks to global growth continue to persist."
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