London 28/03/2012 - Spot gold fell back during Wednesday afternoon in Europe, pulled down by a dramatic fall in physical buying in India.

Spot gold was last down $7.43 at $1,673.35-1,673.91 per ounce, stepping back after hitting an intraday high of $1,684.73 earlier.

On the charts, the market has moved through support at $1,674, with the next level pegged at $1,668, close to the day's lows.

“Enthusiasm for precious metals waned as the boost from (Federal Reserve Chairman) Bernanke’s doveish comments the previous day began to fade. Evaporating physical demand also pushed gold lower, dragging down the rest of the complex,” Standard Bank, said.

The All India Gems and Jewellery Trade Federation contends that about 85 percent of India's 300,000 jewellers remain on strike to protest over a government plan to double gold coin and bar import duties to four percent.

As a result of this, physical demand in India remains very low, but the Indian government has said it will observe a new tax on unbranded gold jewellery.

“The amount of pent-up demand when the stores reopen would be important to gauge the physical demand from Asia, which should put a floor to the gold price,” Sharps Pixley, said.

However, physical demand is expected to pick up in April because of the Akshaya Tritiya festival - the second-most important festival for gold buying - at the end of the month.

In wider markets, the euro was trading around 1.3290 versus the US dollar, well below the intra-day high of 1.3374 seen earlier.

Gold is still partly supported by Fed Chairman Ben Bernanke's hints at further quantitative easing, which may be necessary to lower the country's unemployment rate. Although this has fallen to 8.3 percent, it remains at high levels.

Additional monetary easing would be unequivocally bullish for gold because cheap money tends to debase the dollar and create future inflationary risk. Moreover, negative real interest rates are also positive for gold - these should persist until the first half of 2013 at least.

Datawise, core durable goods orders came in as expected, increasing 1.6 percent. However, durable goods orders month-on-month at 2.2 percent were down against the expected 3.0 percent.

Among other precious metals, silver, at a one-week high of $33.09 yesterday,  slipped today to $32.21-32.27, down 34 cents from yesterday’s close.

Elsewhere, platinum fell $18 to $1,638-1,647 per ounce and palladium eased over $17 to $641-656.

(Additional reporting by Tom Jennemann. Editing by Martin Hayes)

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