By Jan Harvey LONDON, Dec 21 (Reuters) - Gold surrendered gains on Wednesday in line with the euro after a tender for cheap European Central Bank loans failed to convince investors it would ease Europe's deep-seated debt problems, despite attracting greater-than-expected interest. Spot gold was down 0.4 percent at $1,608.14 an ounce at 1501 GMT, well off an earlier high of $1,641.50 an ounce. It is still up more than 13 percent this year. Banks took 489 billion euros at the ECB's first ever offering of three-year funding, initially lifting hopes a credit crunch could be avoided. Gold prices rose as the tender lifted stocks and the euro at the dollar's expense. It lost traction, however, as those gains went into reverse. "Gold has been trading like a risk asset, along with other metals, and trading on the dollar-euro exchange rate," said Citigroup analyst David Wilson. "The underlying issues, in terms of the macro environment, remain fragile. Europe is going to be in recession next year, the U.S. maybe will see modest growth, and China (is) slowing. That is still positive for gold... but right now gold is trading as a risk rather than a risk hedge." European shares fell in thin trade after investors booked profits from earlier session gains as hopes that banks would use the ECB's three-year funding to buy peripheral debt waned, with Italian and Spanish yields rising. The faltering euro, meanwhile, allowed the dollar to move back into positive territory. Bullion, like other dollar-priced assets, tends to benefit from weakness in the U.S. currency, as it becomes cheaper for holders of other currencies.

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