(REUTERS) -- Gold eased on Monday after elections results in France and Greece that reflected strong anti-austerity feeling raised concerns over the euro zone's ability to battle its debt crisis, knocking the euro to a three-month low against the dollar.
Greek voters in particular rejected the austerity-for-aid policies that have shielded the country from bankruptcy and a euro exit, dealing a serious blow to the euro zone's fragile political consensus on debt.
Assets seen as higher risk, like stocks and commodities, came under pressure along with the euro. European stocks slumped to 4-1/2 month lows, Brent crude oil fell to its lowest since January, and safe-haven German Bund futures hit record highs.
Spot gold was down 0.2 percent at $1,639.10 an ounce at 1143 GMT, while U.S. gold futures for June delivery were down $5.20 an ounce at $1,640.00.
Gold opens the week lower with investors in risk-off mode after this weekend's election. Stocks are weaker, the euro is losing ground, and since gold is currently considered as a riskier asset, it is also losing ground, Alexander Zumpfe, a trader at precious metals house Heraeus, said.
Nonetheless, he added that some buying trickling through was arresting further losses in gold. We already saw some physical buyers coming back this morning, he said.
Concerns over the outlook for the euro zone were a key factor driving gold prices to record highs last year, but as the dollar, Bunds and U.S. treasuries took over as investors' havens of choice, it has come under pressure along with the euro.
If the situation in the euro zone worsens significantly, analysts say it could once again become a positive driver of gold, as Europeans scramble to diversify away from the euro.
Greek voters enraged by economic hardship caused by the terms of an international bailout turned on ruling parties in their election, putting the country's future in the euro zone at risk and threatening to revive Europe's debt crisis.
In France, Socialist Francois Hollande won Sunday's presidential polls as expected. Markets are as yet uncertain about his agenda, and anxious to see how hard he will push to dilute a German-led European austerity drive.
With growing influence of anti-austerity political blocs, tensions among the euro zone will likely be intensified and a wave of renegotiations for bail-out programs may be sparked, Credit Agricole said in a note on Monday.
PHYSICAL DEMAND FAILS TO SHINE
Physical gold demand in Asian markets was lackluster, with buyers returning to the sidelines after picking up bargains when prices dropped below $1,630 last week, dealers said.
However, gold imports to India, the world's biggest buyer of bullion, could rise on pent-up demand from jewelers after the federal government decided to scrap an excise duty on jewelry it imposed in March, Prithviraj Kothari, president of the Bombay Bullion Association, told Reuters on Monday.
The federal government will withdraw the excise duty on all jewelry effective March 17 - the date it was introduced - Finance Minister Pranab Mukherjee told parliament.
Buying picked up slightly in the United States. Data from the U.S. Mint showed sales of American Eagle gold coins have already reached 20,000 ounces so far this month, the same amount in volume terms as was sold in the whole of April.
From a technical perspective, gold remains in limbo, analysts who study past price moves to determine the future direction of trade said on Monday.
Gold remains locked in a range, Barclays Capital said in a report, adding that it expects buying to pick up as prices ease towards the $1,600 an ounce area.
A move above the 1,690 area would confirm our bullish view toward the range highs near 1,800, it added. Seasonality leads us to expect a mid-year sideways chop before we become more bullish in the second half of the year.
Money managers, including hedge funds and other large speculators, increased their net length in gold in the week ended May 1 by 8,462 contracts to 116,061 contracts, the highest level since the week of April 8, data from the Commodity Futures Trading Commission showed on Friday.
But they reduced their silver length by 191 contracts to 10,565 contracts, the lowest level since early January.
Spot silver was down 0.3 percent at $30.25 an ounce, while spot platinum was up 0.3 percent at $1,525.49 an ounce and spot palladium was up 0.6 percent at $650.22 an ounce.