PRECIOUS-Gold falls on euro zone fears, options expiration

* Scenes of protest against austerity plans in Spain weigh
* Pressured by selling related to COMEX October option
expiry
* South Korea, Paraguay add gold to holdings
* Coming up: U.S. new home sales Wednesday

(Recasts, adds details, graphic link, updates market activity)
By Frank Tang
NEW YORK, Sept 25 (Reuters) - Gold edged lower after choppy
trade on Tuesday, on selling related to an option expiration and
renewed fears about the euro zone debt crisis.
Scenes of large-scale protests against anti-austerity
measures in Spain rekindled fears about the region's
three-year-old debt crisis. European Central Bank President
Mario Draghi offered a vigorous defense of the ECB's bond-buying
plans and said it was now up to governments to follow with
decisive policy steps of their own.

Gold is still 4 percent higher for September following a
sharp rally on hopes the central banks will keep the credit
flowing by offering bullion-friendly stimulus.
"Gold is likely to continue to consolidate. Maybe a shoe
drops over in Europe and that knocks gold prices which are
overbought at these levels," said Phillip Streible, senior
commodities broker at futures brokerage R.J. O'Brien.
Traders said that some disappointed futures investors sold
as current prices were over $30 or 2 percent below the popular
$1,800 call strike at the U.S. COMEX October gold option
expiration at end of business Tuesday. (COMEX options interest:
link.reuters.com/xaj82t)
The gold market was still underpinned by news earlier in the
day that South Korea and Paraguay both significantly added gold
to their reserves in July, highlighting strong interest in gold
among the official sector.
Spot gold inched down 0.2 percent to $1,760.25 an
ounce by 3:06 p.m. EDT (1906 GMT). The metal hit a near-seven
month high at $1,787.20 an ounce last week, but has since met
technical resistance to break above this year's high at
$1,790.30.
U.S. COMEX gold futures for December delivery settled
up $1.80 at $1,766.40 an ounce, with trading volume about 20
percent below its 250-day average, preliminary Reuters data
showed.
COMEX futures' open interest, which measures outstanding
long and short contracts, rose to a one-year high of 490,744
lots as of Friday. Open interest in U.S. gold futures has gained
more than 25 percent in the past 30 days.

CENTRAL BANKS BUY GOLD AGAIN
Data from the International Monetary Fund on Tuesday showed
South Korea raised its holdings of gold by nearly 16 tonnes in
July. The country has doubled its bullion reserves in just one
year after being one of the largest purchasers of gold in 2011.
Paraguay also raised its reserves in July from a few
thousand ounces to more than 8 tonnes. So far this year, central
banks have added a net 262.1 tonnes to their reserves, compared
with 203.4 tonnes in the first eight months of 2011.
Private investors have also added to their holdings of gold
through exchange-traded funds backed by physical metal, which
now hold a record 74.1 million ounces.
In other precious metals, silver edged down 0.7
percent to $33.71. Platinum gained 0.7 percent to
$1,626.25 an ounce, while palladium was down 0.9 percent
on the day at $634.97 an ounce.
Platinum group metals rebounded, after palladium's biggest
one-day drop in six months on Monday, as platinum output
appeared to return to normal in top producer South Africa.
3:06 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold DEC 1766.40 1.80 0.1 1761.30 1777.90 135,807
US Silver DEC 33.948 -0.036 -0.1 33.730 34.545 42,212
US Plat OCT 1631.80 9.80 0.6 1617.90 1644.50 17,626
US Pall DEC 640.85 -4.65 -0.7 637.50 649.55 3,800

Gold 1760.25 -3.40 -0.2 1760.03 1774.90
Silver 33.710 -0.230 -0.7 33.720 34.470
Platinum 1626.25 11.82 0.7 1621.36 1638.99
Palladium 634.97 -6.03 -0.9 640.00 647.00

TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 153,074 151,762 183,839 16.88 -0.31
US Silver 45,924 58,720 52,991 35.84 7.55
US Platinum 31,529 19,466 9,341 23.65 0.18
US Palladium 3,919 8,471 4,645

(Editing by Sofina Mirza-Reid)