Comex gold fell to a one-month low in a choppy abbreviated session on Friday, extending a shakeout as the dollar recovery against the euro accelerated and the appeal of safe-havens dimmed.
Benchmark futures held to relatively narrow $5.50 range, after on Thursday's $13.30 rout, before metals started closing for Monday's US Martin Luther King Jr. holiday.
The euro's losses snowballed after a week of comments from the European Central Bank expressing worries about the currency's 20 percent rise over the past year.
But gold bulls were reluctant to sell aggressively before a long weekend. February gold settled down $1.70 at $407.00 an ounce.
It plumbed its lowest price since December 15 at $405.70, off a high of $411.20 hit in a brief rally after the open.
Estimated volume was 48,000 contracts, compared with Thursday's frantic 109,039. The liquidation reduced open interest by 6,444 contracts.
Graham Leighton, a vice president at Societe Generale said the technical picture economic fundamentals could be aligning negatively for gold, which could easily see $390 an ounce if $400 broke.
"All we need to do now is get to the point here where we change market sentiment a little bit from the precious point of view and we could see these prices tumble fairly significantly," he said.
The selling of dollars for gold lifted the February contract to a 15-year high at $431.50 last on Tuesday.
Gold prices went up 20 percent last year amid dollar diversification. With worries about the US occupation of Iraq and al Qaeda attacks, speculators were holding one of the largest longs ever, betting that gold would be seen as the safest alternative to the greenback.
However, the Bank of Japan has been intervening to stop the rise of the yen, which is at its highest price in more than three years against the dollar.
Many worry the ECB may start selling its currency or cut interest rates to stimulate its economy, and that has taken the steam out of the euro's record run.
The euro fell to $1.2374/77 on Friday from the close at $1.2575/80.
On Monday it reached a lifetime high of $1.2898, awarding European bullion buyers with extra currency leverage.
A commodity broker said the long-term gold outlook remained bullish, describing the pullback as a "big correction with a little influence from the euro."
He concluded, "This is just a much-needed correction." Spot gold closed at $406.20/6.95, down from the late quote at $408.75/9.50 on Thursday.
London's afternoon fix was $408.40. March silver bucked gold's sell-off, rising 11.7 cents higher to $6.33, more than halving on Thursday's 21.7-cent tumble. The range was $6.165 to $6.34. Spot silver rose to $6.27/29 from $6.19/21. The fix was $6.205. Silver hit a six-year high on Monday at $6.795.
Nymex April platinum rose $3 to $851.90 an ounce. Spot closed at $853.00/858.00. March palladium went up $4 to $219.65 an ounce. Spot last fetched $213.00/218.00.
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