Gold prices retreated from an earlier two-week high in Europe on Wednesday as persistent concerns over Europe's finances hurt the euro and weighed on stock markets, while a supply upset in major producer South Africa lifted platinum to a five-month high.

Spot gold was down 0.2 percent at $1,754.93 an ounce at 1306 GMT, having earlier touched a high of $1,759.84, while U.S. gold futures for February delivery were down $1.40 an ounce at $1,757.20.

The euro struggled for traction versus the dollar, retreating from the previous day's near two-week high as optimism over a long-awaited Greek bailout deal quickly gave way to worries about economic growth and implementation risks.

The 130-billion-euro ($172 billion) rescue for Greece agreed by euro zone finance ministers on Tuesday came at the cost of forcing Athens to commit to unpopular cuts and private bondholders to take bigger losses.

Every time we have another package (for Greece) agreed or more concessions wrung from investors, there is an ever more muted cheer. Cynicism is creeping in, and that is affecting the gold price, said Sharps Pixley Chief Executive Ross Norman. It firmed a bit with the bailout, but not significantly so.

European shares retreated from early highs and safe-haven German Bund futures rose after weaker-than-expected economic data and as investors worried about the tough task Greece faces to implement the budget cuts required. .EU

A retreat in risk appetite also weighed on other commodities such as copper and oil.  

Even assuming the new Greek programme proceeds as planned, the Greek government crisis is far from over, said HSBC in a note. This deal will help creditors to be repaid, as the funds will be channeled into an escrow account to ensure that lenders are prioritized, but it will not revive economic growth any time soon.

With the Greek economy now in its fifth year of recession and already having contracted in the fourth quarter by 7 percent year-on-year, even the revised debt sustainability analysis looks optimistic.

RATE OUTLOOK SUPPORTS GOLD

In the longer term, gold is expected to continue benefiting from low U.S. interest rates, central bank buying and strong demand from key markets like China. Goldman Sachs reiterated its positive 12-month view on gold on Wednesday.

We expect U.S. real interest rates to remain lower for longer given our U.S. economics team's expectation for U.S. economic growth to remain slow through 2012, it said.

Consequently, we expect gold prices to continue to rise through 2012, reaching $1,940 an ounce in 12 months, and we continue to recommend a long gold position.

Among other precious metals, silver was down 0.6 percent at $34.08 an ounce. Spot platinum was up 0.6 percent at $1,693.49 an ounce, while spot palladium was up 0.4 percent at $710.22 an ounce.

Platinum prices rallied to their highest since September 22 in earlier trade at $1,705.50 an ounce, lifted by ongoing unrest at one of the world's biggest platinum mines, Impala Platinum's Rustenberg facility.

A violent labor dispute at the mine has already cost Implats at least 80,000 ounces in lost output. Implats said on Tuesday it was hopeful that most of the workforce at its Rustenburg operations would be persuaded by union leaders to return to work.

We think a slow return to production at Impala's Rustenburg operations over the next month is likely, with total lost output expected to exceed 100,000 ounces of platinum and 45,000 ounces of palladium, said Credit Suisse in a note.

The market does not 'need' those ounces at present: industrial and jewelry demand are both currently subdued, and platinum sponge is trading at a significant discount to ingot.

Nonetheless, platinum narrowed its historically unprecedented discount to platinum to around $65 from $230 in January.