Gold fell on Thursday as the euro edged up against the dollar and oil prices firmed, but prices were still set for a daily decline as investors took their cue from currency markets. Spot gold was bid at $1,492.09 an ounce at 1433 GMT, against $1,496.30 late in New York on Wednesday. US gold futures for June delivery fell $4.2 to $1,491.50.
The dollar fell against the euro and trimmed gains against the yen after a key index of regional business activity unexpectedly hit a seven-month low in May, and after data showed another fall in US existing home sales. But the overall strength of the US currency has undermined gold and other commodities this month.
"There is probably some consolidation around where we are, perhaps to test $1,500. I think the dollar will continue to play an important role," said RBS analyst Daniel Major. "We've had some very choppy price action today but we have seen a small turnaround in what has been a strengthening trend in the dollar that we've seen throughout May."
Gold usually moves in the opposite direction to the dollar, as strength in the US currency makes dollar-priced assets pricier for non-US buyers, and this inverse correlation is trading close to its lowest levels since mid-January.
The dollar's 3 percent rise against a basket of currencies this month has diminished some investor appetite for gold, which is now about $80 off early May's record high at $1,575.79.
Interest in gold investment products like bullion-backed exchange-traded funds remained soft, with holdings of the world's largest, New York's SPDR Gold Trust, declining by nearly 30,000 ounces on Wednesday.
The World Gold Council said in a report on Thursday that investors turned away from gold-backed exchange-traded funds in the first quarter in favour of coins and bars.
Gold coin and bar investment rose in most geographical areas in the first quarter, the WGC data showed, more than doubling in China to 90.9 tonnes, rising 54 percent in the United States to 22.5 tonnes and almost doubling in Europe to 78.1 tonnes.
"It is very interesting that we continue to see a high level of enthusiasm from European investors," said the WGC's Research Manager Eily Ong. "We still see a very slow global economic recovery, and ongoing sovereign debt issue in the euro area."
Holdings of the largest silver ETF, the iShares Silver Trust, also declined by 1.316 million ounces, the fund said on Wednesday. Its holdings rose strongly throughout last year, but silver's recent more than 30 percent price dive has been accompanied by outflows.
The other more industrial precious metals picked up in line with a rise in the oil price and as base metals pared some of the day's earlier losses.
Silver was last up 0.9 percent at $35.31 an ounce, while platinum was up 0.2 percent at $1,767.00 an ounce and palladium up 0.7 percent at $733.72.
Platinum and palladium have firmed this week during London's Platinum Week, as miners, recyclers, traders, analysts and end-users gathered here for the launch of a key industry report from Johnson Matthey and other events.
"Major players gathering in London for (Platinum) week expressed cautious optimism for PGMs, even though most people we talked to do not see a spec drive similar to that at the start of the year, concentrating on the favourable fundamentals instead," said VTB Capital analyst Andrey Kryuchenkov.
"We are also mildly bullish on PGMs, but we see many more uncertainties than at the start of the year amid a faltering economic recovery, expectations of monetary tightening in the US, ongoing tightening in China and concerns over automotive demand due to high fuel prices among other things."
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