PRECIOUS-Gold down on concern about Europe, buoyant shares

* Spot gold may test resistance at $1,329/oz -technicals

* Palladium hits record high at $1,111.40/oz Tuesday

* Platinum off 3-1/2-month peaks marked on Monday

(Adds analyst comments, updates prices, adds LONDON dateline) LONDON, Jan 9 (Reuters) - Gold drifted lower on Tuesday, weighed down by a firmer dollar on the back of concerns about instability in Europe, while a buoyant stock market also sapped enthusiasm for bullion.

Spot gold was down 0.5 percent at $1,314.51 an ounce

at 1100 GMT. Last week, prices touched their strongest since Sept. 15 at $1,325.86.

U.S. gold futures fell 0.4 percent to $1,315.50 an

ounce. The dollar hit a more than one-week high against a basket of

other major currencies on Monday . It was up 0.2 percent

on Tuesday, making commodities priced in the greenback more expensive for buyers using other currencies. "The dollar has bounced back, partly due to weakness in the euro," said Jonathan Butler, commodities analyst at Mitsubishi in London. The euro is down due to concerns about upcoming Italian elections, problems forming a government in Germany and lingering concerns about Brexit, he added. "There's also the continuing rally in the equity markets. All of that has probably helped take the wind out of gold's sails," Butler said. Over the next few days, gold may extend losses to around $1,300 and the 100-day moving average around $1,290, he added. Other analysts expect gold to bounce back. Spot gold may test resistance at $1,329 per ounce, as suggested by a Fibonacci retracement analysis and a triangle, according to Reuters technical analyst Wang Tao. "A break above last week's high of $1,324 could see the yellow metal make a move on the September top of $1,355," said MKS PAMP Group trader Tim Brown.

Among other precious metals, spot silver fell 0.8

percent to $17.01 an ounce.

Platinum dropped 1.1 percent to $961.50, after

hitting a 3-1/2 month peak on Monday at $973.60.

Palladium was up 0.6 percent at $1,106.80 after

touching a record high of $1,111.40 an ounce. "Now that we're above $1,100, there's the potential for profit taking - some of the longs are getting rather extended on Comex," Butler said. "But the speculative froth aside, we're still in a very strong fundamental market and those fundamentals should keep prices pretty well supported over the next few months."

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Edmund Blair)