| NEW YORK/LONDON
NEW YORK/LONDON Gold ended with healthy gains on Tuesday after rising early to its highest level since late June, as renewed concerns about the European banking system sent investors seeking safe-haven assets.
Gold bullion was up to $1,256.90 an ounce by 3:31 p.m. EDT (1931 GMT) from $1,249.55 an ounce in late Monday trade. Earlier, it hit a high of $1,259.80.
COMEX December gold futures firmed $8.20 to close at $1,259.30 an ounce, a 0.66 percent gain, having climbed to $1,261.60, a peak last seen on June 28.
Gold denominated in euros hit a greater than two-month peak at 990.98 euros an ounce, while strength in the yellow metal lifted silver to 2-1/2 year highs at $20.04 an ounce.
"I think it was a pretty one-dimensional day. I didn't see any catalyst other than the European-led bank concerns driving gold up," said James Steel, metals analyst at HSBC in New York.
Prices moved up as investors sought gold in a safety play after concerns resurfaced about the health of some European bank debt.
Gold advanced, world stocks retreated and the euro weakened after the Wall Street Journal reported that recent European banking sector stress tests underestimated some lenders' holdings of potentially risky government debt.
While gold rose, the euro fell as investors' risk appetite dissipated amid new concerns over European banks. The U.S. dollar rose against most major currencies on the renewed bank concerns.
"Risk-off again, with European banks potentially needing to raise additional capital, seems to have dampened the excitement after Friday's U.S. data," said Ole Hansen, senior manager at Saxo Bank.
Better-than-expected U.S. payrolls data lifted risk appetite and pressured gold on Friday.
"Gold investors' loyalty toward the yellow metal looks to be rewarded as it slowly grinds its way back toward the record highs," said Hansen, adding that another round of profit taking could take place before significant new highs are reached.
But many analysts agree that gold's trend is still pointing north.
Despite gold's higher levels, trading volumes remained moderate as many U.S. players opted to take time off, extending the Labor Day holiday that shut all U.S. markets on Monday.
With a light economic calendar and the Jewish holiday later in the week, trade could stay thin all week.
Steel noted that quiet trading periods tend to benefit gold, but there were no guarantees.
Among other commodities, oil prices fell more than 2 percent and base metals like copper, zinc and lead all declined as gains in the dollar made them more expensive for non-U.S. investors.
Moreover, risk averse investors fled industrial metals in favor of gold with greater perceived safety.
Demand for gold was steady in Asia, as the festival season gets under way in India. Gold is widely offered there as gifts in religious celebrations and weddings, accounting for 20 percent of global jewelry demand.
Among other precious metals, platinum was lower at $1,551.50 an ounce against $1,555.30, while palladium was down at $519.50 against $523.83.
Both metals have benefited from expectations of a recovery in autocatalyst demand -- the biggest segment of consumption -- but were sold on Tuesday in the risk aversion play along with other industrial metals.
Spot silver slipped to $19.80 after its earlier 2-1/2 year high.
"On a fundamental basis, we still expect the silver market to be in surplus this year, thus investor appetite will remain pivotal for prices to retain their upward momentum," said Barclays Capital in a note.
(Reporting by Carole Vaporean; editing by Jim Marshall)