LONDON, Dec 23: Gold bullion in Europe drifted a touch lower in seasonally thin trading on Tuesday, tracking the dollar’s equally slight recovery against the euro, traders said.

Analysts and traders said gold had lost last week’s momentum when prices reached $414.60 an ounce, the highest since 1996, but was supported by the US government’s warning that there was a high risk of a militant attack on the country.

The warning and an increase in the security alert to the second highest helped the dollar find a $1.2447 all-time low against the euro, its fourteenth slump in 17 sessions.

“It looks like a slightly disappointing performance today — there’s a lack of interest. We won’t see any catch-up until after the Christmas holiday,” one trader said.

Analysts said traders were not keen to change positions as the market was settling to a Christmas lull with slim trading.

The Japanese markets were on holiday on Tuesday celebrating the Emperor’s birthday and several countries begin Christmas holidays on Wednesday.

Another trader said: “There’s a lot of people such as producers, refiners and fund managers who have closed their books for the year. So gold is just tracking the currencies due to the momentum-led participants being away.”

By 1615 GMT gold fetched $409.40/409.55 an ounce compared with New York’s close of $410.00/$410.75.

Some traders expected gold to ease further on Wednesday when trading will cease around midday, but others said buyers will emerge if prices dip.

A ScotiaMocatta Daily Precious Metals report said: “The yellow metal is nowhere near overbought with the RSI at 64.3. Therefore, dips should be interpreted as good buying opportunities for now.”

Gold prices have increased about 16 per cent in 2003, during which time the dollar weakened 15 per cent against the euro and 10 per cent against the yen.

This, together with the US-led war in Iraq and worries about global stability, has compounded gold’s reputation as a safe bet.

Analysts said they expected gold prices to test a $417.70 eight-year high, which looked to be broached last Thursday, though probably not during the quiet holiday season.—Reuters