Gold falls on credit downgrade fears, tracks euro

American gold bars stand on display during a preview of ''Gold'', a new exhibition dedicated to the highly prized mineral at the American Museum of Natural History in New York, November 15, 2006.

NEW YORK/LONDON (Reuters) - Gold dropped on Tuesday as the dollar rallied versus the euro on renewed fears of credit downgrades in major European economies and uncertainty over Greece's bailout.

Bullion slid with the euro after Moody's warned it may cut its triple-A credit ratings of France, Britain and Austria. The ratings agency cited the euro zone debt crisis.

Weaker-than-expected U.S. retail sales data also cut investors' risk appetite, even though economists said the pick-up in sales excluding autos provided a firm footing for economic recovery.

Spot gold was down 0.4 percent at $1,715.60 an ounce by 2:13 p.m. EST (1913 GMT), having touched an intraday low of $1,711.70 earlier in the day.

U.S. gold futures for April delivery settled down $7.20 at $1,717.70. Trading volume was 20 percent below its 30-day average but higher than its previous session's.

Analysts expect the precious metal to trade in a range for the forseeable future.

"Any rallies will be capped against the overall potential of an economic slowdown, absent truly new actions by the European governments," Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.

"I'm not surprised to see gold working in a trading range in next couple of weeks," he said.

Technical selling weighed on gold again when it failed to rise above Monday's high around $1,730 an ounce. Last week, gold encountered heavy technical selling around $1,750 an ounce, the highs set in early December.

"We are concerned about gold's immediate future in light of the chart of gold in dollar terms. The trend line that has defined gold's rise since late December has been broken," said Dennis Gartman, a veteran trader.

Gold has slipped in February after rising 11 percent in January, when it was boosted by the Federal Reserve's nero-zero interest rate outlook for nearly three more years.

Federal Reserve policymakers on Tuesday are turning to cars to illustrate just how split they are over what if anything to do about the U.S. economy, with some eying the brake pedal and others the gas.

KEY EURO ZONE MEETING EYED

While the Moody's news rattled the markets, focus remained on Greece, which has acknowledged it still has much to do to persuade the European Union and International Monetary Fund to save it from a chaotic default.

Euro zone finance ministers have asked the Greek government for details of how it will fill a massive gap in its plan for extra savings this year ahead of a key meeting on Wednesday.

Gold remains more sensitive to moves in the euro in the short term than to rising risk aversion. The euro zone debt crisis has been a positive driver of prices last year.

The gold market now awaits U.S. regulatory filings from money managers which will show their holdings during the fourth quarter of 2011. While the filings mostly look backward, they provide the best insight into where hedge funds are placing their bets.

Among other precious metals, silver was down 0.7 percent at $33.44 an ounce. Spot platinum was down 1.4 percent at $1,621.24 an ounce, while spot palladium was down 1.8 percent at $682.72 an ounce.

Platinum prices fell after a recent rally on the back of supply outages in major producer South Africa.

(Additional reporting by Jan Harvey in London; Editing by Marguerita Choy; and David Gregorio)