Gold traded lower on Tuesday, under pressure from a stronger dollar, but a surprisingly weak read of U.S. factory activity enabled the euro to claw back some gains, thereby helping the bullion price pare earlier losses.
Earlier, Greek Prime Minister George Papandreou's surprise decision to call a popular vote on Athens' agreed bailout dented most assets priced in euros, pushing up peripheral euro zone bond yields and boosting the U.S. dollar.
The fallout from the collapse of failed broker MF Global Holdings Ltd also rippled through global markets.
MF Global failed to protect customer accounts by keeping them separate from the firm's funds, a top U.S. regulator said, as administrators to the collapsed brokerage's UK arm scrambled to close out billions of dollars worth of client positions.
Spot gold was last down 0.5 percent at $1,705.39 an ounce by 1542 GMT, having fallen earlier to a session low of $1,681.74 an ounce.
At the moment gold price is caught between dollar weakness and the need for liquidity amid heightened uncertainty, said Barclays Capital analyst Suki Cooper.
From here, as we are in a seasonally strong period, the downside (in gold) should be supported. But the upside very much rests with the safe-haven interest. We still do expect that demand to materialise as Q4 progresses but in the near-term we would expect prices to be a bit choppy, she said.
Meanwhile, the euro trimmed losses against the dollar after the Institute for Supply Management said its index of national U.S. factory activity dipped to 50.8 from 51.6 the month before, coming in below forecasts for an improvement to 52.0, according to a Reuters poll of economists.
Germany and France said they were determined to fully implement the decisions taken at last week's European Union summit, which further supported the single European currency.
Greece has caused even more confusion by calling for a referendum and we can't ignore the washout from the MF Global story because their positions are being unwound, said Credit Agricole analyst Robin Bhar.
He added that the Bank of Japan's decision to intervene in currency markets on Monday to stall the rise of the yen -- sometimes used as a safe-haven currency because of the country's low yields -- could ultimately drive gold higher.
Although the dollar has been one of the major beneficiaries of the angst surrounding the euro zone, investor interest in gold has continued to pick up this week, as reflected by the inflows of metal into exchange-traded funds.
Investor interest in gold continued to pick up this week, reflected in inflows of metal into exchange-traded funds.
Holdings of gold in the major exchange-traded funds (ETF) tracked by Reuters have risen by over 800,000 ounces in October, marking their first monthly increase since July.
Gold, of late, has moved in tighter lock-step with industrial commodities such as copper, or riskier assets such as equities, in the last month and has thus been more prone to falling in times of uncertainty, rather than adopting its traditional safe-haven role and benefiting from such turmoil.
Silver was lower at $33.15 an ounce from $34.23 previously. Platinum cut its declines to $1,584.25 an ounce from Monday's closing bid at $1,593.15. And palladium was quoted at $632.45, off $641.08 previously.
For platinum group metals, Tuesday's data on U.S. car sales was expected to be supportive with incomplete results showing robust, though mixed, October sales. A Reuters poll forecast annualized sales of 13.20 million vehicles sold in October.