* Dollar index hovers near 5-week high
* SPDR holdings remain unchanged on Monday (Updates prices, adds comments)
By Clara Denina
LONDON, May 14 (Reuters) - Gold edged lower on Tuesday, snapping earlier gains, as the dollar steadied against the euro after mixed European economic data, while investor sentiment remained cautious and physical demand slowed in some markets.
Gold fell 0.2 percent to $1,427.56 by 1316 GMT, having risen by one percent to a session high of $1,444.96 an ounce in earlier trade. The metal has faced the pressure of a stronger dollar over the past few sessions, hitting a two-week trough of $1,420.61 on Friday.
It has fallen about 14 percent this year.
U.S. gold futures for June delivery were down 0.9 percent to $1,421.90 an ounce.
"Currency movements are clearly driving the market at the moment and then if you look at bond yields they are also moving higher, indicating that investors prefer to put their money in other assets," Credit Suisse analyst Karim Cherif said.
"We had a technical rebound, people have been buying gold particularly on the physical side, but now we are back to those factors that we have referred to as being negative for gold, such as continued investment outflows, deflation expectations, dropping systemic risk and weak technical outlook."
The dollar index edged up against a basket of major currencies, not far from a five-week high struck on Friday, helped by the euro's fall after weaker-than-forecast ZEW sentiment data from Germany.
Meanwhile, a surprise rise in April's U.S. retail sales on Monday strengthened the view that the world's largest economy remains resilient, while damping speculation the Federal Reserve will extend its bullion-friendly bond-buying programme.
Accommodative monetary policies favour gold as low interest rates encourage investors to put money into the non-interest-bearing asset, speculating on price gains.
Gold has recovered about $120 since a sell-off in mid-April dragged prices to more than two-year lows at $1,321.35, but it is still well below last month's peak of around $1,600, as investors shifted into equities and cut exposure to bullion.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, stood unchanged at 33.811 million ounces on Monday, just off their lowest level since March 2009.
The fall in gold prices last month led to a surge in physical buying in Asia and elsewhere, helping to pluck prices off lows, but physical demand for some gold products began to subside.
"While gold coin sales have been brisk, undoubtedly helping the recent recovery, we have to suspect that the 'bargain-buying' off the lows has decelerated somewhat after the initial spurt," said Edward Meir, a metals analyst at futures brokerage INTL FCStone. "And we suspect it will continue to do so, particularly if prices start to wobble once again."
In other precious metals, silver fell 1.3 percent to $23.30 an ounce, platinum was up 0.9 percent to $1,489 an ounce and palladium rose 0.2 percent to $712.72 an ounce.
Platinum was boosted by a wildcat strike at the South African operations of producer Lonmin. (Additional reporting by A. Ananthalakshmi in Singapore; editing by Mark Heinrich)