Gold futures were likely to test support at USD1,562.45 a troy ounce, the low from July 23, and resistance at USD1,586.65, the high from July 20.
Moody’s Investors Service earlier said it cut its outlooks on Germany, the Netherlands and Luxembourg to negative from stable on the expectations that the three investment-grade countries will end up shouldering debt in Italy and Spain.
The news sent investors running to the dollar, which trades inversely from gold.
Fears the Spanish debt crisis is getting worse pushed the yellow metal down as well.
Spain recently said the recession will run through 2013, a year originally expected to see recovery, which further fueled demand for greenbacks.
Meanwhile fresh data hit the wire pointing to an increasingly anxious European consumer.
A European Commission index on consumer confidence dropped to -21.6 for July from -19.8 in June.
The index hit its lowest point since August 2009 and came in well below analysts' forecasts for a -20.0 reading.
The yellow metal did see some support, however.
Reports surfaced over the weekend that the International Monetary Fund was considering abandoning participation in Greek lending facilities over concerns the country will miss debt-reduction targets, however the fund will continue talks with Greek officials later Tuesday as planned, which bolstered gold.
Elsewhere on the Comex, silver for September delivery was down 0.37% and trading at USD27.200 a troy ounce, while copper for September delivery was down 0.19% and trading at USD3.436 a pound
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