September 26, 2012 / 1:01 AM / 5 years ago

Gold down but off two-week low, EU debt crisis eyed

A vendor arranges gold accessories at a jewellery shop in Hefei, Anhui province May 11, 2010.Stringer

NEW YORK (Reuters) - Gold prices ended down on Wednesday but off an earlier two-week low as a stronger dollar and weaker crude oil triggered profit-taking after bullion's recent sharp rally boosted by stimulus by central banks around the world.

The metal was weighed down by gains in the U.S. dollar after data showed new U.S. home sales held near two-year highs in August and prices vaulted to their highest in more than five years.

Bullion has extended its losses to a third straight day. It is still 3.5 percent higher for the month following a sharp rally on hopes the central banks will keep the credit flowing by offering bullion-friendly stimulus.

On Tuesday, gold fell as large-scale protests against anti-austerity measures in Spain rekindled fears about the European Union's three-year-old debt crisis.

"Investors will be keeping a close eye on the events in the EU," said Sean Lusk, precious metals analyst at futures brokerage Ironbeam.

"As we are at the month- and quarter-end, today's selloff probably encompassed some profit taking in the precious metals," Lusk said.

Spot gold was down 0.5 percent at $1,751.50 an ounce by 3:51 p.m. EDT, recovering from a two-week low reached earlier in the session at $1,737.50 an ounce.

U.S. gold futures for December delivery settled down $12.80 at $1,753.60, with trading volume about 10 percent above its 250-day average.

Worries over the euro zone debt crisis, as Greece faced its biggest anti-austerity strike for months and Spain's central bank suggested the country's recession was deepening, also knocked European shares and crude oil futures sharply lower. .EU

GOLD INVESTMENT FIRMS

Investment in gold has been firm, with holdings of gold-backed exchange-traded funds rising by nearly 300,000 ounces on Tuesday, according to Reuters data, to a record 74.063 million ounces, with most fresh flows moving into the SPDR Gold Trust.

Silver rose 0.7 percent to $33.93 an ounce. Spot platinum was up 0.5 percent at $1,628.20 an ounce, while palladium was down 1.1 percent at $624 an ounce.

Platinum prices have retreated from the 6-1/2-month highs they hit this month after violence linked to labor unrest at a mine operated by number three producer Lonmin in South Africa led to 45 deaths.

Additional reporting by Jan Harvey in London; Editing by James Dalgleish

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