European gold stalks higher ground, euro supports

Gold moved higher in Europe on Tuesday, with investors encouraged by a slightly firmer euro against the dollar, but dealers were not ready to rule out further losses. Spot gold stood at $421.15/421.90 an ounce by 1600 GMT compared with $419.00/419.50 late in New York on Monday. "The market is holding over $418, which means it has the capacity to move up to $425, but I think prices may still be vulnerable to the downside," Peter Hillyard, head of European metal sales at ANZ bank, said.
He said a break of support at $418 might open the door to further losses - targeting $410 ahead of $405.
Bullion reached a near 16-1/2-year peak in December at $456.75, but since the start of this year the metal has lost more than 3-1/2 percent as the dollar fought back from record lows against the euro.
But the US currency extended its fall from seven-week highs against the euro on Tuesday as traders resumed their view that US policy towards the dollar was one of benign neglect.
Currency watchers were also bracing for Wednesday's US trade data.
The euro was last at $1.3147/48.
The trade figures for November could highlight the lasting imbalances in the US economy that have weighed on the dollar over the past three years.
A weaker dollar makes gold more attractive to non-US investors, but some dealers said investors could shy away from the market while prices stayed below resistance at $427.
"The downtrend is still intact though bearish sentiment stalled to some extent," Alexander Zumpfe of Dresdner Kleinwort Wasserstein said in a daily report.
A Reuters poll forecast the US trade deficit to narrow to $54.0 billion in November from a record $55.46 billion in October as a weaker dollar and cheaper oil prices more than compensated for sluggish foreign demand.
Zumpfe said strong trade figures and the expectation of further positive US economic data later this week could limit the downside for the dollar.
Platinum group metals moved higher as investor buying came back into the market.
Spot platinum rose to $856.00/860.00 from $846.00/850.00 late in New York on Monday, while palladium stood at $187.00/192.00 from $188.00/193.00 previously.
Silver followed gold, with the spot price moving up to $6.57/6.60 from $6.41/6.44.