By Amanda Cooper LONDON, May 26 (Reuters) - Gold eased on Thursday after a sharp sell-off in the silver market, but still remained within sight of three-week highs, supported by investors seeking perceived havens from the worsening euro zone debt crisis. Europe's policy options to avert a Greek debt default appeared to be dwindling, sparking fears of a chain reaction affecting other heavily indebted countries in the 17-nation currency bloc. The euro rose to one-week highs against the dollar after a report that China was interested in buying "bailout bonds" for Portugal, although ongoing concern about the lasting impact of the crisis pulled the currency off session highs. This in turn helped the dollar pare gains and stripped as much as 4 percent off the silver price, denting gold. Spot silver XAG= fell to a low of $36.30 an ounce before recovering to trade down 2 percent at $37.12 by 0943 GMT, while spot gold XAU= was down 0.1 percent at $1,520.89 an ounce, after hitting $1,532.00 on Wednesday, its strongest since May 4. "This is a major intraday reversal of some 8 percent, the potential right now is that we see one step forward and two steps back in silver and I think it can continue," said Commerzbank analyst Eugen Weinberg. "The real problem is the price increase before was overdone and the market was overheated... speculative investors have not yet exited (their positions)," he said, adding: "This is a situation where the tail is wagging the dog." Euro-denominated gold XAUEUR=R slid by about 0.6 percent on the day but still held near a record just above 1,088 euros an ounce struck on Wednesday, while dollar-priced gold was expected to maintain more stability. "We are in for a prolonged period of prices treading water and probably stagnating at around $1,500. I wouldn't be looking for as much positive dynamic going on, despite the demand for it as a safe-haven right now being fuelled by the debt crisis," Commerzbank's Weinberg added. SILVER VOLATILITY Silver touched a record at $49.51 in late April before falling sharply on a broad sell-off in commodities and after exchange operators in Shanghai and New York raised the amount of money required to trade silver futures. The CME Group (CME.O) may bring down margins over time once the market volatility eases, Harriet Hunnable, CME managing director for metals products, told Reuters in a phone interview. CME, operator of the world's leading energy, grain and precious metal markets, hiked trading margins for silver five times over a two-week period up to May 9 by a total of about 84 percent. [ID:nL3E7GQ0D5] "We still think that concerns about the ability of the EU to manage Greece's sovereign debt problems and potential contagion to other peripheral countries will be supportive for gold," said Natalie Robertson, commodities strategist at ANZ. "After this heavy sell off at the beginning of the month, silver is kind of retracing some of those gains. When gold prices will go up, silver prices will go up even more. It's a little bit more volatile than the gold market." Reflecting some of the investor disenchantment with silver was another decline in global holdings of the metal in exchange-traded funds. Silver ETFs continue to leak metal and holdings have fallen by nearly 9 million ounces this week alone, which has brought the year-to-date outflow to 8.4 pct, or 42.79 million ounces. [GOL/ETF] In the physical gold market, jewellers from Indonesia cashed in on gold after recent gains in prices, but main consumer India was chasing bullion as the wedding season progresses. Potentially bullish for gold was an estimate from metals consultancy GFMS that China could import as much as 400 tonnes of metal this year, compared to around 200 tonnes last year when it ranked as the world's second largest consumer after India. [ID:nB9E7EK00F] Among other precious metals, platinum XPT= was down 0.3 percent at $1,772.24 an ounce, while palladium XPD= was down 0.5 percent at $741.65 an ounce.

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