Gold prices fell almost $6.00 in Europe to test psychological support at $400 an ounce as the dollar firmed on Tuesday ahead of a monetary report from US Federal Reserve Chairman Alan Greenspan.
"The market has dribbled down with the euro and there was simply a lack of buying to take up the slack," a dealer said.
Spot gold stood at $400.20/400.70 per troy ounce by 1421 GMT, down from $405.70/406.20 late in New York on Monday.
The dollar climbed against the euro as markets awaited the Greenspan report. He testifies to the Senate Banking, Housing and Urban Affairs Committee at 1830 GMT and the House Financial Services Committee on Wednesday.
Given recent signs of slower US growth, markets expect the US central bank chairman to repeat his pledge to be patient in raising interest rates.
Gold market participants are alert to nuances in monetary policy because any aggressive interest rate rises would tend to raise demand for the dollar - dulling the allure of bullion for non-US buyers.
The euro was at $1.2379, versus $1.2444 in late US trade.
Gold has been above key support at $400 for almost two weeks, although the market is still some way off the 15-year peak achieved earlier this year at $430.50 when fund buyers piled into the market on dollar weakness.
A Reuters poll on Monday showed gold prices were likely to hold above $400 an ounce this year and next on expectations the dollar would stay weak and world security worries would keep investors hedging their bets on where money was safe.
The global survey of 24 analysts pointed to an average gold price of $404.50 an ounce in 2004, up 11.2 percent on 2003. Gains were expected to be pared to an average $402.50 in 2005.
John Reade of UBS Investment Bank said in a daily report that gold could be vulnerable to a short-term correction if the euro didn't forge higher soon against the dollar.
"Over the past forty-eight hours we have become more negative on the near term prospects for gold after the recent build in Comex longs and the stickiness of the euro," he said.
Silver, moving with gold, slid lower with the metal's technical indicators looking overbought.
It came unstuck after failing to breach resistance at $6.75 on Monday and was last at $6.43/6.46, compared with $6.60/6.62 in New York overnight.
Platinum was firm after trading up to a six-week high of $836.00 on Asian buying. It was last at $830.00/835.00 compared with New York's last quoted $826.00/831.00.
Striking workers at Stillwater Mining Co's largest mine voted to accept a new three-year contract, the company said on Tuesday. The strike shut down nearly three-quarters of US production of palladium and platinum for a week.
Palladium rose slightly to $225.00/230.00 from $224.50/ 230.50.
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