Gold turned flat Thursday after failing to break above $1,400 an ounce, as safe-haven buying faded after European lenders offered a liquidity safety net for vulnerable banks and as U.S. data showed signs of an improving economy.
Silver and platinum group metals gained on news that a gauge of jobless benefits hit a new two-year low, pending home sales unexpectedly rose in October, and retailers posted their best sales gains in four years in November.
Wall Street rose sharply for a second straight day, with the Standard & Poor's 500 index climbing over 1 percent.
"In gold, you are seeing some traders who are reallocating to other markets due to strength in stocks after indications of improving economy," said George Gero, precious metals strategist at RBC Capital Markets.
Gold has struggled to gain upward momentum for a new test of its record high at $1,424.10 an ounce set on Nov. 9, in spite of lingering worries that Europe's debt crisis could spread to other countries following bailouts of Ireland and Greece.
European Central Bank President Jean-Claude Trichet said the ECB would keep providing banks unlimited liquidity well into next year, but it did not commit to a major bond-buying program to contain the euro zone crisis.
Spot gold was up less than 0.1 percent at $1,388.60 an ounce at 2:08 p.m. EST (1908 GMT), having earlier set a three-week high at $1,398.20. U.S. gold futures for February settled up $1 at $1,389.30 an ounce.
Spot silver rose 0.5 percent to $28.58 an ounce.
COMEX gold and silver volume was sharply lower than their 30-day average, and trading was highly volatile because of the thin turnover.
Bullion had looked set to go above $1,400 an ounce, but investors took profits as the metal approached that level several times in earlier trade but failed to break it.
The euro rose in volatile trading, boosted by reports the ECB was buying euro zone bonds, but uncertainty over the outlook for peripheral euro zone countries should keep the currency under pressure.
"There's obviously been a bit of ECB: 'what will they do/how will it help sovereign risk fears in Europe', but we've still got concerns on Portugal and Spain and I think those will linger which will sustain those inflows into ETFs (exchange traded funds)," said Michael Lewis, analyst at Deutsche Bank.
The ECB left its key interest rate unchanged at a record low 1.0 percent, as expected.
Gold has made solid gains this week, currently up nearly 2 percent, amid investor jitters that the crisis could spread.
CHINESE IMPORTS FALL
In China, the world's second biggest gold consumer, the chairman of the Shanghai Gold Exchange said on Thursday that the country's gold imports soared in the first 10 months of the year to 209.72 tonnes.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings rose to 1,293.891 tonnes by Dec 1 from 1,286.603 tonnes previously. The holdings hit a record at 1,320.436 tonnes on June 29.
Wednesday's more-than-seven-tonne rise represents the largest one-day inflow to the fund since Oct. 14, and comes after the trust's holdings fell in both October and November. continues to be the star performer, jumping to a 9-1/2 year highs at $768.22 an ounce. It later rose 3.8 percent to $759.47. Platinum rose 1.8 percent to $1,712.74. (Additional reporting by Elizabeth Fullerton and Jan Harvey in London; Editing by Kieran Murray)