Gold edges down with euro

Gold edged down on Tuesday, tracking the euro\'s weakness as investors watched the Spanish debt market with renewed worries about the debt crisis in Europe, but safe-haven demand may lend support to bullion prices. Sentiment in the euro remained vulnerable ahead of a Spanish debt auction later in the day. Spain is set to see its borrowing costs leap when it sells short-term bonds after jitters over its deficit and banking sector pushed longer term risk premiums above 6 percent on Monday. Analysts said gold\'s safe-haven appeal may attract investors again if the situation in Europe worsens. \"We expect that if European credit conditions continue to deteriorate, gold (along with the dollar) could start to better reflect the growing tensions by moving higher on its steam,\" said Ed Meir, an analyst at INTL FCStone in a research note. Spot gold edged down 0.1 percent to US$1,649.70 an ounce by 0312 GMT, extending the price decline to a third straight session. US gold was little changed at US$1,650.80. Technical analysis suggested that spot gold could fall to US$1,630 an ounce during the day, said Reuters market analyst Wang Tao. A stronger dollar may cap gains in gold and keep prices in a range, especially as the U.S. economic recovery seems to be on track, said Lynette Tan, an analyst at Phillip Futures in Singapore. \"People may buy into the dollar as a safe haven, which causes some kind of neutral trade in gold,\" Tan said, \"We are looking at gold trade between US$1,600 to US$1,660.\" The dollar index rose to a one-month high in the previous session, weighing on dollar-priced commodities as they become more expensive for buyers holding other currencies. Investors will closely watch a policy meeting at the US Federal Reserve next week, seeking cues on the central bank\'s attitude towards monetary easing after a weaker-than-expected March employment report released earlier this month fueled hopes for stimulus measures. Silver stockpiles in COMEX-monitored warehouses rose to their highest level in at least 10 years, showing near-term supply of the metal is plentiful as mine output holds at record levels and the global economic recovery struggles for traction. Spot silver traded flat at US$31.43, off a one-week low of US$31.16 hit in the previous session.