Gold and silver drop in European trade

Gold and silver fell to six-week lows on signs that Greek banks will continue to get emergency funding despite a breakdown in debt talks between their government and euro zone partners. A person familiar with the matter told Reuters the European Central Bank (ECB) was unlikely to pull the plug on funding for Greek banks this week, raising hopes that policymakers will eventually break the impasse to strike a deal.
The ECB is set to decide on Wednesday whether to maintain emergency lending to Greek banks.
Spot gold fell as much as 2.2 percent to its lowest since January 6 at $1,204.03 an ounce in earlier trade and was down 1.9 percent at $1,208.10 by 1548 GMT.
Silver tumbled 5.2 percent to a six-week low of $16.23 an ounce. It was down 4.7 percent at $16.40 by 1548 GMT, while platinum dipped to its lowest since July 2009 at $1,164 an ounce.
"People think that eventually things will move towards a solution because there is a lot a stake in the euro zone," Julius Baer analyst Carsten Menke said.
Investors typically seek safety in bullion during economic uncertainties and when riskier assets such as equities take a hit.
But hopes that a compromise would eventually be reached between Greece and international lenders deterred investors from increasing their exposure to gold.
The metal fell as broader market sentiment was not in panic mode, with equity markets outside Greece rising.
Talks between Greece and euro zone finance ministers over the country's debt crisis broke down on Monday when Athens rejected a proposal to request a six-month extension of its international bailout package.
The market was awaiting the minutes from the latest US Federal Reserve's meeting on Wednesday for clues around an expected interest rate hike.
"Minutes will be closely watched ...to see what policymakers' sensitivity is to a June rate hike," Macquarie analyst Matthew Turner said.
The dip in gold prices comes on the last trading day before China heads for a week-long Lunar New Year holiday, after which prices could take a further hit as buying from the No.2 consumer tapers off.
Buying from China has been supportive of gold prices in the run up to the holiday, when the precious metal is bought widely for gift-giving. Premiums on the Shanghai Gold Exchange were firm at $3-$4 an ounce.
Palladium was down 0.4 percent at $783.95 an ounce.