Gold price retreated below $1,670 an ounce on Wednesday as caution ahead of a European Central Bank meeting pressured the euro versus the dollar, and as a recent brighter tone to economic data boosted the appeal of other assets, such as stocks.
Platinum and palladium hit new 17-month highs, meanwhile, benefiting from rising appetite for industrial metals as confidence in the growth outlook improved, and on concerns over the supply outlook from major producers South Africa and Russia.
Spot gold was down 0.3 percent at $1,668.04 an ounce at 1051 GMT, while U.S. gold futures for December delivery were down $4.30 an ounce at $1,669.20.
The precious metal is down a touch since the start of the year, struggling for traction as a run of better economic data boosted the appeal of assets more highly geared to the economic cycle, such as stocks and industrial commodities.
"Certainly the stronger performance of more conventional assets, certainly equity markets, has taken the shine off gold," Deutsche Bank analyst Daniel Brebner said.
"Safe-haven assets have performed fairly poorly as expectations of growth have improved... and a lot of those debt-related risks have for the time being faded into the background. In that kind of environment, there is no signficant motivation for gold prices to rise on the basis of investment demand."
The euro fell 0.3 percent agains the dollar. ECB president Mario Draghi is likely to face tough questions on Thursday about the impact of the euro's recent appreciation on growth and inflation speculation, although the bank is unlikely to contemplate an interest rate cut.
European stocks rose 0.4 percent on Wednesday, paring early losses after a positive earnings forecast from steelmaker ArcelorMittal. Overnight in Asia, a slide in the yen bolstered Japanese equities to their highest since Oct. 2008.
The Japanese currency neared a three-year low on Wednesday on expectations that a new Bank of Japan governor could ease policy. That helped send the most active gold futures contract on the Tokyo Commodity Exchange (TOCOM), currently December , to record highs for a fifth day at 5,073 yen a gram.
Investment demand for gold in Europe and the United States remains subdued, however, leading spot prices to underperform.
"Investors remain unconvinced gold is capable of replicating its decade-long robust performance through to 2012, given recent improvement to global risk sentiment and rallying equity markets," VTB Capital said in a note.
"Bullion's correlation to the broader equity market has weakened significantly in the past month."
INDIAN CENTRAL BANK MULLS GOLD IMPORT CURBS
The Reserve Bank of India said on Wednesday it could limit gold imports by banks in "extreme circumstances", as the world's biggest consumer of gold battles a record-high current account deficit.
India, which imports about 900 tonnes of gold a year with 60 percent of that through banks, last month hiked the import duty on gold again, to 6 percent from 4 percent.
Customs data showed yesterday that gold flows from Hong Kong into China, which is vying with India as the leading buyer of bullion, hit record levels last year.
"Some caution is warranted when making direct links to underlying demand," UBS said in a note. "Nevertheless, Hong Kong trade statistics, considered together with other indicators such as activity on the SGE, still paint a robust demand story out of China towards the end of 2012 through to early this year."
The positive economic data that has undermined gold fuelled interest in the platinum group metals, which are chiefly used in autocatalysts and highly exposed to car demand. Platinum and palladium prices both hit multi-month highs on Wednesday.
Spot platinum hit a 17-month peak at $1,740 an ounce and was up 1.4 percent at $1,728.99 an ounce, while spot palladium was up 0.3 percent at $765.47 an ounce, having earlier reached its strongest in 17 months at $768.22.
As well as expectations for a pick-up in demand, both have benefited from anticipation that supply from South Africa and, in palladium's case, Russia will be curtailed this year.
Silver was down 0.5 percent at $31.63 an ounce.