Gold on back foot as Spain woes pressure euro

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Gold edged down on Wednesday as investors continued to fret about the eurozone debt crisis with Spain's borrowing costs spiralling towards unsustainable levels, keeping the euro close to its lowest level in nearly two years.

FUNDAMENTALS

* Spot gold edged down $1 to $1,553.54 an ounce by 0029 GMT, after sliding more than 1 per cent in the previous session.

* U.S. gold inched up 0.3 per cent to $1,553.30.

* Spanish bond yields rose on Tuesday as investors fretted that efforts to recapitalise the country's frail banking sector could mean the government selling more bonds and adding to the growing pressure on public finances.

* Rating agency Egan-Jones cut Spain's credit level for the third time in less than a month, as the country's weak banks continue to worry investors.

* Greece's pro-bailout conservatives are leading ahead of a national parliamentary election next month that may determine whether the country remains in the eurozone, an opinion poll showed on Wednesday.

* U.S. home prices edged higher for the second month in a row in March as the housing recovery picked up traction, while gains in some of the hardest hit areas suggested the improvement was becoming more broad-based.

* Holdings of the iShares Silver Trust, the world's largest silver-backed exchange-traded fund, dropped nearly half a percent from the previous session to 9,619.03 tonnes by May 29, the lowest in nearly two weeks.

MARKET NEWS

* U.S. stocks rose on Tuesday as signs Greece would stay in the euro zone were enough to spark buying in what has been a weak month for equities, while Facebook plumbed new lows on high volume.

* U.S. crude futures held steady on Wednesday, after a downgrade of Spain's credit rating sent the euro to a near two-year low against the dollar and pressured oil prices a day earlier.

* The euro traded close to a near two-year low hit in the previous session, as worries about Spain's soaring borrowing costs and struggling banking sector drove investors away from the single currency.