LONDON Gold firmed on Tuesday as physical buying from Asia drove a second day of recovery from six-month lows last week, but gains were limited by a lack of interest from Western investors before U.S. Federal Reserve minutes later this week.
Spot gold was up 0.2 percent at $1,612.36 an ounce at 1315 GMT, having fallen to a six-month low of $1,598.04 on Friday after breaching key support levels.
U.S. gold futures for April delivery were up 0.2 percent to $1,612.20.
Gold fell 3.8 percent last week and even though it has recovered some lost ground, analysts see little chance prices will rally in the short term. Sentiment has remained fragile and investor confidence has been tarnished by signs of improving economic conditions.
"There is a general perception that things are getting better in China and in the United States, so the argument would be why would you hold gold when there are signs of macroeconomic improvement?" Citigroup metals strategist David Wilson said.
"It seems that investor money is generally going into other assets including equities at the moment, and metals seem to be detaching from that."
Last week's drop pushed gold into a lower technical range between $1,550 and $1,625, making it vulnerable to further losses in the short term, traders said.
European stocks rose and Bunds fell on Tuesday after better-than-expected German ZEW economic sentiment data. The euro rose to a session high against the dollar before surrendering gains.
Gold has tended to track stock markets for much of the last year, benefiting from a sharper appetite for assets seen as higher risk, but the relationship is volatile.
Investors will scour the minutes from the latest policy meeting of the U.S. Federal Reserve due on Wednesday for hints on the central bank's attitude to monetary stimulus, which has been a key driver behind gold's rally over the past two years.
"The previous minutes ... indicated the potential for removing quantitative easing by the end of the year, and if that's confirmed, gold would fall further, because you would expect the dollar to strengthen," Wilson said.
Graphic-Spot gold 24-hour technical outlook: here
S.AFRICA MINE DISRUPTION SUPPORTS PGMs
Platinum prices steadied above early lows after labour tensions in South Africa's platinum sector raised renewed concerns over supply.
Anglo American Platinum (AMSJ.J) said all its South Africa shafts were closed due to an illegal work stoppage following mine violence on Monday, when at least 13 workers were wounded in clashes between rival unions.
Spot platinum erased initial losses and hit a session high of $1,699.24 an ounce, before easing back to $1,689.74, down 0.1 percent but well off an early low of $1,672.50. Palladium was up 0.4 percent at $764 an ounce.
Platinum managed to regain its traditional premium over gold for the first time in almost a year last month after Amplats said it planned to mothball two South African mines, sell another and cut 14,000 jobs.
The gold/platinum ratio on Tuesday dipped to its lowest since early August 2011, with an ounce of gold buying 0.95 ounces of platinum. Platinum's premium over gold is approaching $80 an ounce, a near 19-month high.
But European car sales began 2013 with an 8.5 percent fall, weighing on outlook for platinum demand.
The European market is dominated by diesel engines, which use platinum in catalyst converters to clean exhaust emissions.
Broker UBS cut its one-month platinum forecast to $1,650 from $1,720, anticipating potential downside risks to sentiment surrounding the U.S. automatic budget sequestration due in March.
Silver was up 0.4 percent at $29.97 an ounce.
(Editing by Jason Neely and Jane Baird)