Gold retreats in Europe, as US data boost dollar

Gold dropped on Tuesday afternoon in Europe, as investor money flowed into the dollar on stronger-than-expected US consumer confidence data, dealers said. Spot gold fell to $423.10/423.90 per troy ounce by 1538 GMT, compared with $426.60/427.35 late in New York on Monday, but was expected to stay within recent ranges, they added.
Gold had been glued into a narrow $426-$427.75 band earlier on Tuesday as dealers waited for fresh impetus after a euro rally last week cut the price loose from its two-week old $420-$425 range.
"The major impulse is coming once again from the currency side - gold came off from its high ($427.75 on Tuesday) as the euro lost ground against the dollar after US data were released," A European dealer said.
However, he expected the metal to hold support at $420.
The dollar firmed broadly, extending its gains on Tuesday, after the US consumer confidence reading in January came in at 103.4, compared with economists forecasts for 101.0. The euro was last at $1.2961.
A stronger US currency dents the appeal of dollar-denominated gold for non-US investors.
Dealers were still broadly upbeat on bullion's chances of gaining from current levels, expecting the dollar to return to an overall three-year downturn on worries over the fiscal, current account and trade deficit.
Bullion is some way off the 16-1/2-year peak reached in December at $456.75, but analysts were looking for another sweep higher soon.
"Overhead resistance around the $428.50 and $430.00 level needs to be overcome for further gains to be made, but there is increasing evidence that the foundations are being laid for another move higher in the bullion price," HSBC metals analyst Alan Williamson said in a report.
He noted that speculative exposure to gold via the COMEX futures market in New York had moved to its lowest since June, leaving room for fresh buying.
Silver eased down after the market ran to its highest since late December on Monday due to gains in gold.
Analysts said the market might try to move up again to $7.00 - last seen on December 29 - but noted that the metal was prone to sharp volatility.
Spot silver was last at $6.70/6.72 compared with $6.82/6.85 late in New York on Monday.
Platinum fell back from consumer-led gains on Monday and was last indicated at $861.50/866.50 from $869.50/874.50 previously, while palladium stood at $187.50/192.50 from $188.50/194.50.