Gold prices slipped below $1,180 an ounce in Europe on Monday knocked by a dearth of haven buying as confidence in the financial markets improved, though some emergent physical demand limited losses.
Spot gold was bid at $1,177.65 an ounce at 6:21 a.m. ET, against $1,181.50 late in New York on Friday. U.S. gold futures for August delivery fell $4.00 to $1,179.90.
Investment in the precious metal has tailed off over the summer months as assets seen as higher risk like equities firmed at gold's expense. This has helped drag gold from the record $1,264.90 an ounce it hit in June.
There is currently hardly any great sense in buying gold, said Quantitative Commodity Research consultant Peter Fertig.
The situation in the southern European countries has eased... and in the U.S. the market is more concerned about the double-dip recession, he added.
The world's largest bullion exchange-traded fund, the SPDR Gold Trust, saw its biggest outflow in a year last month, with holdings down more than 38 tonnes in July to 1,282.3 tonnes.
Better appetite for risk boosted other markets. Equities made strong gains on Monday in Europe, with the FTSEurofirst 300 .FTEU3 rising 2 percent in early trade. .EU
This followed a strong session in Asia, where stocks rose on Monday on strong corporate earnings and shrugged off news that Chinese manufacturing shrank in July amid investor hopes that the world's fastest growing major economy will expand strongly.
Other assets seen as higher risk also rose, with oil prices climbing more than 1 percent to above $79 on Monday as macroeconomic indicators in top energy consumers the United States and China showed slower but sustained growth.
The dollar index .DXY hit a three-month low on Monday, hurt by worries that the U.S. economy's recovery is losing steam, while the euro firmed and the high-yielding Australian dollar reached a three-month high.
PHYSICAL DEMAND FIRM
Nonetheless lower prices encouraged higher gold demand from key bullion-consuming centers China, India and the Middle East.
Indian gold buying rose on Monday afternoon as traders took advantage of the strong rupee, which made the dollar-quoted asset cheaper, to complete deals, traders said.
Meanwhile imports into major gold consumer Turkey rose to 19.9 tonnes in July, the Istanbul Gold Exchange said, from 14.3 tonnes a year ago and 300 kilograms in June.
Elsewhere, the World Gold Council said the International Monetary Fund sold 17.4 tonnes of gold in June as part of a planned program of bullion sales. That leaves 120.2 tonnes of gold still to be sold under the program.
Other industrial precious metals outperformed gold as risk appetite improved.
Silver was at $18.11 an ounce versus $17.96, while its ratio to gold -- or how many ounces of silver are needed to buy an ounce of gold -- hit its lowest since mid-May at 65.0.
Platinum was at $1,579.50 an ounce against $1,566.55, while palladium was at $496.35 against $491. Palladium reached a fresh 10-week high at $498 an ounce in earlier trade.
Both metals saw significant interest on the New York futures market last week, according to the Commodity Futures Exchange Commission's Commitment of Traders report.
An assessment of platinum and palladium positioning reveals a rush of investor support last week, said UBS analyst Edel Tully in a report. Platinum net longs soared by 15.1 percent, or 119,300 ounces.
Even during platinum's perceived bullishness earlier this year, the metal did not experience such a swelling in net long holdings in one single week, she said. Palladium followed a similar path, with the Nymex book adding 118,700 ounces or 8.8 percent.
(Editing by Sue Thomas and Alison Birrane)