European gold backs off peaks as funds take profits

Gold prices turned tail in Europe on Tuesday afternoon, tracking back from a near-four-week high as fund buyers took profits from the market's latest upswing, dealers said. They said scope still remained for further gains, with fresh purchases seen on the lows. Spot gold fell to $424.90/425.60 per troy ounce by 1545 GMT from $426.00/426.70 late in New York on Monday. The market earlier hit $427.50 - its highest since May 11.
"I'm still friendly to the market but its hard to see much going on over the next few days, so we could be range-bound between $424-$428," Peter Hillyard, head of precious metal sales at ANZ Bank, said.
"I think the significant break out of that range will be to the upside - $432 is a real possibility," he added.
Dealers said the market would also take heart from the United States restating its opposition to any proposed sales of International Monetary Fund gold to finance poor nations' debt relief.
British finance minister Gordon Brown, who has spearheaded a proposal to use IMF gold, said earlier on Tuesday that he was confident of a package with 100 percent debt relief for the world's poorest countries in the next few days.
The euro gave back earlier gains to last trade at $1.2272.
Analysts said sentiment was gloomy on the single currency as the euro zone's weak economic outlook cemented expectations that interest rate differentials with the United States would widen further.
HSBC metals analyst Alan Williamson said in a daily report that market attention would turn towards US Federal Reserve chairman Alan Greeenspan's testimony to the Senate Joint Economic Committee and Friday's US trade data.
"We expect the trade deficit to widen to $58 billion following March's much better than expected $55 billion, which should give the euro, and as a result gold, support for another move higher," he said.
Worries about the United States twin deficits had been a major factor behind the dollar's three year slide, culminating in a record low against the euro late last year.
In other precious metals, silver fell as speculators took profits after the market's brief flurry to a fresh peak for 2005 on Monday at $7.64.
Spot silver was last at $7.44/7.47 from $7.50/7.53 late in New York on Monday.
Platinum dipped to $874.00/878.00 from $876.00/880.00, while palladium eased to $187.00/191.00 from $188.00/193.00.