LONDON, June 1: Gold sat near its lowest in almost four months on Wednesday in Europe as the euro hit its lowest in more than seven months on worries about stability in the euro zone, dealers said. Spot gold slipped to $415.60/416.30 per troy ounce by 1045 GMT from $416.50/417.20 late in New York on Tuesday when the market hit a low of $413 — last seen in mid February.

Dealers said losses had been limited by physical business coming in at the lower levels. I feel quite positive on gold. The euro is looking a bit sold out here and physical gold business is quite dramatic in terms of tonnes going out of London every week, a dealer said.

I would tend to be a scale-down buyer at these levels, he added. The euro extended its slide against the dollar on Wednesday after media reports that a possible failure of European Monetary Union (EMU) was discussed at a meeting at which the German Finance Minister and the Bundesbank President were present.

Neither Finance Minister Hans Eichel nor Bundesbank President Axel Weber commented on the risk of EMU failure at the meeting, the reports said. A German Finance Ministry spokesman said Eichel saw no danger of EMU failure.

The Bundesbank said it would issue a statement in response to the reports. Traders said this year’s low of $410.40 might be in store for gold if the euro saw further losses. But analysts said bullion’s relative resilience in the face of significant drops in the euro were positive for the metal, with a bounce seen as possible if US data due later this week came in weaker than expected.

Certainly, the continued resilience of gold is encouraging and suggests good upside potential if Friday’s non-farm payrolls disappoint, triggering a move lower in the dollar, HSBC metals analyst Alan Williamson said in a daily report.

In other metals silver paused after hitting a 2-1/2-month peak on Tuesday in New York at $7.45. Speculators had snapped up the metal on talk of the launch of a silver Exchange-Traded Fund and on the price differential between gold and silver.

Spot silver eased to $7.36/7.39 from $7.42/7.45 late in New York on Tuesday. The break above the key band of resistance between $7.30 and $7.35 set up a possible test of the next band of resistence located between $7.55 and $7.65, Standard Bank said in a daily report.

The gold/silver ratio closed below key support at 57:1 and will now be looking for a test of 51:1, the bank added. Platinum rose to $866.00/ 871.00 from $859.00/864.00, while palladium stood at $183.00/187.00 from $182.00/ 185.00. —Reuters