Gold dips as firmer dollar offsets euro zone concerns

Gold Coins and Credit Suisse gold bar
Getty Images

Gold dipped on Tuesday as an uptick in the dollar offset the supportive impact of concerns over Greece's future in the euro zone and fears over escalating violence in Ukraine, which hurt risk appetite.

A 0.1 percent rise in the dollar against its currency basket led gold to stall after the previous day's rise, preventing a steeper recovery from Friday's three-week low.

Spot gold was down 0.4 percent at $1,234 an ounce, while U.S. gold futures for April delivery were down $9 an ounce also at $1,233.

Prices slid to $1,228.25 on Friday after upbeat U.S. jobs data fueled expectations that the Federal Reserve will raise interest rates this year, overriding concerns about the economic health of the euro zone, which lifted prices 8 percent last month.

Those concerns are now reasserting themselves, with nervousness over Greece potentially withdrawing from the euro and the conflict in Ukraine weighing on global markets on Tuesday.

Gold's tough run

"We're expecting a rebound, partly because of what does seem to be a gathering storm around Greece and Europe," Capital Economics analyst Caroline Bain said. "There is a lot of uncertainty surrounding the euro zone which we think will be supportive of gold prices this quarter."

The probability of Greece leaving the euro zone has risen several notches as Prime Minister Alexis Tsipras has taken an increasingly hard line over government debt. Tsipras has insisted that his country would not extend its reform-linked bailout.

European Commission President Jean-Claude Juncker told Greece not to expect the euro zone to bow to Tsipras' demands in a growing confrontation that has rattled financial markets and prompted U.S. and Canadian pleas for calm and compromise.

Read MoreShould you write off gold this year?

Those concerns were offset by the firmer dollar, however, in which gold is priced.

On the main physical markets for gold, premiums over spot prices on the Shanghai Gold Exchange contracted slightly, MKS said in a note on Tuesday, but remained between $2.50-3.50, showing demand has emerged at lower levels.

"The worry will be, when the Chinese go on holiday next week and the natural support is taken away, will gold fall further?," it said. Some Asian markets close next week for the Lunar New Year holiday.

Among other precious metals, silver was down 0.8 percent at $16.85 an ounce. Platinum was flat at $1,213.10 an ounce, while palladium was down 0.1 percent at $776.22 an ounce.