Gold was steady on Wednesday as investors awaited further developments on the conflict in the Korean peninsula amid worries about the euro zone debt crisis.

South Korea warned North Korea of "enormous retaliation" if it took more aggressive steps after Pyongyang fired scores of artillery shells at a South Korean island in one of the heaviest attacks on its neighbour since the Korean War ended in 1953.

"It's mainly safe-haven buying in gold after North Korea and South Korea exchanged fire yesterday, in addition to the buy-on-dip type," said Li Ning, an analyst at Shanghai CIFCO Futures.

"Gold is likely to revisit its record high at the end of this year or next year, thanks to strong demand, particularly from this region.

Spot gold shed $1.5 to $1,374.70 an ounce by 0347 GMT, after rising to $1,382 in the previous session, its highest since Nov 12.

U.S. gold futures fell 0.2 percent to $1,374.7.

In Ireland, the deeply unpopular government said it will explain on Wednesday how it plans to save 15 billion euros over the next four years, inflicting more pain on voters to prove that it can tackle the country's debt.

The euro hovered above two-month lows on Wednesday, while the dollar was steady after rallying near a two-month high of 79.743 in the previous session.

"There is some book-squaring before the U.S. holiday tomorrow. Gold is still on the upside, thanks to risk aversion," said a Hong Kong-based dealer.

Demand from Asian countries remained robust, with bargain hunting seen around the $1,350 level, but scrap selling was scarce, he added.

The U.S. economy grew faster than previously estimated in the third quarter, but a slump in sales of previously owned homes in October indicated the recovery remains too anemic to reduce high unemployment.

The U.S. is scheduled to release a batch of data later in the day, including the weekly initial jobless claims, October durable goods order and new home sales, just ahead of the Thanksgiving holiday on Thursday.

Holdings in the iShares Silver Trust, the world's largest physically-backed exchange-traded fund, rose to record highs for three consecutive sessions, signalling strong investment demand in the metal, seen as an alternate investment from gold.

Holdings in the SPDR Gold Trust remained unchanged at 1,285.084 tonnes.

Spot silver gained 0.3 percent to $27.56 an ounce.

Spot palladium led the precious metals complex by gaining 1.4 percent to $695.72.


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