Gold traded lower on Tuesday, under pressure from a stronger dollar, but a surprisingly weak read of US factory activity enabled the euro to claw back some gains, thereby helping the bullion price pare earlier losses. Earlier, Greek Prime Minister George Papandreou's surprise decision to call a popular vote on Athens' agreed bailout dented most assets priced in euros, pushing up peripheral eurozone bond yields and boosting the US dollar.
The fallout from the collapse of failed broker MF Global Holdings Ltd also rippled through global markets. MF Global failed to protect customer accounts by keeping them separate from the firm's funds, a top US regulator said, as administrators to the collapsed brokerage's UK arm scrambled to close out billions of dollars worth of client positions.
Spot gold was last down 0.5 percent at $1,705.39 an ounce by 1542 GMT, having fallen earlier to a session low of $1,681.74 an ounce. "At the moment gold price is caught between dollar weakness and the need for liquidity amid heightened uncertainty," said Barclays Capital analyst Suki Cooper. "Greece has caused even more confusion by calling for a referendum and we can't ignore the washout from the MF Global story because their positions are being unwound," said Credit Agricole analyst Robin Bhar.
Although the dollar has been one of the major beneficiaries of the angst surrounding the eurozone, investor interest in gold has continued to pick up this week, as reflected by the inflows of metal into exchange-traded funds. Holdings of gold in the major exchange-traded funds (ETF) tracked by Reuters have risen by over 800,000 ounces this month, marking their first monthly increase since July. "Our view is that gold is poised for a move significantly higher as the Greek tragedy has not yet fully played out yet the safe haven role will prevail as the key driver of gold prices as investors seek a lifeboat in a crisis," said Ross Norman, chief executive of bullion broker Sharps Pixley.
Silver was last down 3.2 percent at $33.15 an ounce, while platinum fell 1.2 percent to $1,574.74 an ounce and palladium fell 1.1 percent to $634.22. For the platinum group metals, Tuesday's data on US car sales could prove to be supportive. A Reuters poll forecasts 13.20 million vehicles were sold in October in the world's second-largest car market.