Gold slipped in Europe on Wednesday when disappointed speculators sold as the metal failed again to crack psychological resistance at $400 an ounce, despite the weaker dollar that was hit by higher oil prices and geopolitical upheaval.
Dealers and analysts said that $400 - last seen in April - would be hard to take out, with plenty of resistance along the way and some reticence to trade up ahead of key US employment data on Friday that could shed light on the prospect of higher interest rates this month.
The dollar fell to two-month lows against the euro amid market worries that surging oil prices, at 21-year peaks, could slow growth and ultimately delay expected US interest rate rises.
The worry persisted despite Tuesday's US Institute of Supply Management figures showing that manufacturing had continued to expand at a robust rate.
A weaker US currency makes dollar-priced gold less expensive for non-US investors, while higher interest rates would tend to raise demand for the greenback.
"I would say the bulls will be a bit disappointed today.
The dollar is basically down and gold hasn't really built any further on the momentum from yesterday," Stephen Briggs, economist with Societe Generale said.
Other analysts said the market would focus on oil prices for their impact on the dollar, while traders said the euro would have to sustain levels above $1.23 in order to hoist gold back above $400.
"More importantly in the short term, we believe, will be the release of US non-farm payrolls on Friday and its impact on the dollar and US interest rate expectations," John Reade of UBS Investment Bank said in a daily report.
Spot gold was quoted at $392.85/393.55 per troy ounce at 1511 GMT, down from $394.30/395.05 quoted late in New York on Tuesday.
The dollar was last at $1.2276 against the euro after dropping to an intraday low of $1.2305.
Geopolitical jitters were also on traders' radar with violence in Iraq and weekend attacks in Saudi Arabia, which added fuel to the oil price rally.
Gold is still some way off the 15-year peak achieved in January at $430.50 when the euro surged against the dollar, but dealers said the market was well placed to eke out fresh gains.
In other precious metals, silver fell following sharp losses in the base metals complex. Spot silver was quoted at $5.94/5.97, compared with $6.03/6.06 previously and an earlier move to $6.13.
Platinum metals weakened. Spot platinum stood at $829.00/834.00 from $842.00/847.00 in New York late on Tuesday. Palladium was a touch weaker at $247.00/252.00 from $249.00/255.00 in New York.
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