Gold fell on Tuesday, retreating from an initial rally, as solid gains in U.S. equities and an improving economic outlook weighed on the metal's safe-haven appeal.
Palladium and platinum rose on better demand expectations after data showed the U.S. services sector expanded in January, while European business optimism hit an eight-month high.
Bullion rose earlier in the session after data showed Hong Kong's net gold flow to mainland China jumped 47 percent in 2012 to a record high. The report was consistent with latest official-sector data showing renewed gold interest among central banks such as Russia, South Korea and other emerging economies.
Spot gold was down 0.1 percent below $1,672 while U.S. gold futures for April delivery settled down $2.90 at $1,673.50, with trading volume about 10 percent below its 30-day average, preliminary Reuters data showed.
Signs that the euro zone economy is stabilizing also pressured gold. The Markit's Eurozone Composite PMI data showed a rise to a 10-month high in January, and the encouraging U.S. service-sector data also drove investors to the equity markets and out of gold, analysts said.
Gold investors are now digesting a report that the fiscal 2013 U.S. budget deficit will dip to $845 billion after four straight years of $1 trillion-plus deficits, data from the Congressional Budget Office showed. Spot silver edged up 0.2 percent to $31.78.
Palladium, Platinum Outperform Gold
Platinum and palladium both rose for a third day on Tuesday, with dealers expecting further gains in coming months as hopes for improvement in macro-economic data encouraged fund buying in the auto-catalyst metals.
An improving global economic outlook and persistent supply disruptions in South Africa, the world's largest supplier, have helped both platinum and palladium to outperform gold and silver so far this year.
Switzerland's net exports of platinum more than tripled and of palladium jumped more than 50 percent in 2012, data from the Swiss customs bureau showed on Tuesday. Switzerland is a major refining and trading hub for the platinum group metals.
Analysts, however, warned of still patchy platinum group metals (PGMs) demand, with continued weakness in the European market offsetting improvements in the United States and China.