LONDON, Aug 1 - Gold bullion continued to retreat on Friday in Europe after a fairly stable overnight session in Asia after the dollar, buoyed by positive news on the U.S. economy, notched up further gains against the euro, traders said. The precious metal was knocked to its lowest in just over a week at just under $352 an ounce and might feel more competition from the dollar if the next set of data from the United States, due out later today, showed further signs of improvement. Traders pinpointed $350 as a key level for gold. If it managed to hold above that, it might have a chance of rallying back up to recent highs. However, they said a breach of $350 might push prices right back down to $342. "We expect gold to test support at $350 in coming days and would not rule out a move down to the recent low just above $340," UBS Investment Bank said in a daily report. Spot gold was indicated at $352.75/353.50 a troy ounce by 1006 GMT, weaker than New York's late quote on Thursday at $354.00/354.80. With bullion still tracking the dollar/euro movements virtually tick for tick, traders were looking for further direction from U.S. July payroll data and manufacturing data from the Institute for Supply Management due out at 1230 GMT and 1400 GMT respectively. A speculative long position overhanging the New York Comex gold futures market would also make gold vulnerable to further liquidation by funds should the dollar continue to firm. However, analysts were also mindful of a recent trend that had seen metals -- both precious and base -- attract buying from investors looking to place their cash in alternative assets. "An interesting theme recently has been the buying across metals generally, which we saw a lot of last week and earlier this week...that highlights a broader trend of trading commodities as an asset class," Kamal Naqvi, analyst with Macquarie Investment Bank, said. "I think that in the current climate you would expect to see more of that," he said, adding that he would not rule out gold testing $350 beforehand.
MAKE OR BREAK FOR SILVER
Having seen a brief spurt back up to match a recent 3-1/4-year high at $5.21 an ounce on Thursday, silver again retreated and was expected to remain volatile. Standard Bank London said silver might make one last attempt to hurdle the recent peak, but might fall back after that. "Some people have termed this a supernova effect, one last outburst before finally disappearing into the background," the bank said in a report. Spot silver was quoted at the day's high of $5.16/5.18 an ounce by 1005 GMT, up from New York's $5.13/5.15. Platinum slid to its lowest in just over two weeks, attracting speculative selling when it failed to hold above $685 an ounce. Spot prices dropped to $675.00/680.00, the lowest since July 16 and down from New York's late quote at $684.00/689.00. Palladium firmed to a 3-1/2 week high of $181.00/186.00 from $175.50/181/50.