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NEW YORK/LONDON (Reuters) - Gold traded lower on Tuesday, under pressure from a stronger dollar, but weak U.S. manufacturing data enabled the euro to claw back some lost ground, pulling bullion up from earlier losses as well.
When gold began to bounce up off session lows, a bout of short-covering boosted it further. Gold retraced more losses as the euro got a boost from a Dow Jones report about mounting opposition among Greek lawmakers to the referendum.
The Greek government reaffirmed that the vote would take place, which knocked the euro back a bit but gold held its ground.
James Steel, metals analyst and senior vice president at HSBC in New York, said the report about opposition to the referendum "was the turning point. It was more significant than the manufacturing data. The market grabbed onto that news and it helped gold cut losses along with a bit of short covering."
Fallout from the collapse of failed broker MF Global Holdings Ltd MF.N also rippled through global markets.
Late on Monday, Greece's Papandreou called an unexpected referendum on the EU bailout deal for his debt-ridden country. Rejection of the deal by Greek citizens could lead to a disorderly default by Greece on its debt.
On Tuesday, gold curbed some losses after French President Nicolas Sarkozy and German Chancellor Angela Merkel in a phone conversation agreed that they were committed to last week's EU decisions.
Spot gold was quoted at $1,719.39 an ounce by 3:33 p.m. EDT, up from a $1,713.95 closing bid on Monday and well up from a session low of $1,681.74 an ounce.
COMEX benchmark December gold finished down $13.40 per ounce at $1,711.80, but pared that decline to $1,720.50, a $4.70 per ounce drop, in after hours trade in New York.
Germany and France said they were determined to fully implement the decisions taken at last week's European Union summit, which further supported the single European currency.
"This type of plunging dysthymia pushes everyone back to cash and maybe bonds. It will pass soon enough and today's metal prices will look cheap by as early as next week," said John Howlett, Division Vice President at Mitsubishi International Corporation's Bullion Daily Report in New York.
MF Global failed to protect customer accounts by keeping them separate from the firm's funds, a top U.S. regulator said, as administrators to the collapsed brokerage's UK arm scrambled to close out billions of dollars worth of client positions.
"At the moment gold price is caught between dollar weakness and the need for liquidity amid heightened uncertainty," said Barclays Capital analyst Suki Cooper.
The euro trimmed losses against the dollar after the Institute for Supply Management said its index of national U.S. factory activity dipped to 50.8 from 51.6 the month before, below forecasts for an improvement to 52.0.
Investor interest in gold continued to pick up this week, reflected in inflows of metal into exchange-traded funds.
Holdings of gold in the major exchange-traded funds (ETF) tracked by Reuters have risen by over 800,000 ounces this month, marking their first monthly increase since July.
Gold, of late, has moved in tighter lock-step with industrial commodities such as copper, or riskier assets such as equities, in the last month and has thus been more prone to falling in times of heightened uncertainty, rather than adopting its traditional safe-haven role and benefiting from such turmoil.
Silver was lower at $33.15 an ounce from $34.23 previously. Platinum cut its declines to $1,584.25 an ounce from Monday's closing bid at $1,593.15. And, palladium was quoted at $632.45, off $641.08 previously.
For platinum group metals, Tuesday's data on U.S. car sales was expected to be supportive with incomplete results showing robust, though mixed, October sales. A Reuters poll forecast annualized sales of 13.20 million vehicles sold in October.
Editing by Keiron Henderson; Editing by David Gregorio