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Gold jumped to a record high Tuesday after Switzerland pegged its currency to the euro, before closing down as investors took profits.

Analysts said they still expect the precious metal to chart new peaks on worsening euro zone troubles.

The spot price of gold -- which tracks global trades in bullion -- and U.S. gold futures set all-time highs above $1,920 (U.S.) an ounce after the Swiss National Bank imposed an exchange rate cap on the soaring franc to stave off a recession. The SNB aims to keep the franc at or above 1.20 to the euro by buying other currencies in unlimited quantities.

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Profit-taking pushed bullion and gold futures down more than $50 an ounce soon after that record and prices ultimately closed lower.

At 3:35 p.m. (ET), bullion hovered at $1,880 an ounce, down 1 per cent from Monday's late afternoon trade in New York. It was also off the record high of $1,920.30 seen earlier on Tuesday.

U.S. gold futures' benchmark December contract settled at $1,873.30 an ounce, down $3.60 or 0.2 per cent from Friday's close ahead of the Labour Day holiday. Earlier, December gold hit an all-time peak of $1,923.70.

Profit-taking aside, analysts blamed the reversal on the U.S. dollar, which rallied as the Swiss currency fell.

Safe-haven buying of gold further evaporated after surprisingly positive U.S. services sector data in August.

Gold bulls remained convinced of the precious metal's upside potential, saying it was within striking range of the $2,000-per-ounce target.

"I think gold is headed for $2,000," said Frank McGhee, head of precious metals trading at Integrated Brokerage Services in Chicago.

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"In theory, this could actually happen in a matter of days. In reality, if this type of intervention action was taken and was ultimately seen to be ineffective, then the market will get new strength from that. Ultimately, intervention can only cause markets to pause, not change their direction."

Analysts said the SNB should be able to defend the Swiss franc at 1.20 per euro for now, as it can print unlimited currency. But long-term success depended on efforts in the euro zone to deal with debt problems, given the relative strength of the Swiss economy and government finances.

The peg knocked about 8 percent off the value of the franc against the euro. The Swiss currency had soared by a third since Lehman Brothers collapsed in 2008, as investors sought a safe haven from financial market turmoil.

While gold would benefit from the franc's exclusion from the safe-haven club, that did not make it a one-way trade for the precious metal, some analysts said.

"I don't think gold becomes the ultimate safe haven," said Dennis Gartman, author of financial markets newsletter The Gartman Letter and a regular commentator on bullion.

"Safe means stability. What we're seeing in the gold market is anything but stability. Anything that moves as gold has moved today -- from $1,920 all the way down to $1,870 in a course of five minutes -- is hardly safe."

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Gold's 34 per cent rally so far this year, its largest yearly gain since 1979, has been fueled largely by investor worries over debt in the United States and euro zone.

But recent inflows into gold show investors have exercised restraint. Exchange-traded gold funds, which back investors' money with bullion purchases, saw their holdings in gold fall by nearly 2.5 million ounces over the last month to reach a six-week low of 67.4 million ounces.

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