Gold traded flat on Tuesday, recouping initial losses, fueled by worries over a euro zone economic slowdown and fears that France could be sucked into its spiraling debt crisis.   

Bullion largely ignored news billionaire financier John Paulson slashed a third of its ETF bullion holdings in thethird quarter.

Analysts said Paulson's move was not a sign that hedge fund managers were abandoning an upbeat view on gold amidglobal economic uncertainty.   

We do see very active physical and safe-haven buying on dips. Even though we do see pressure from a stronger dollar,dips are seen as buying opportunity and key support levels have held, said David Meger, director of metals trading of futuresbroker Vision Financial Markets.   

Some safe-haven buying lifted gold after euro zone economy posted tepid growth in the third quarter, and a think-tankreport said triple-A rated France should also be ringing euro zone alarm bells as it could not make rapid adjustments to itseconomy.   

Although gold is traditionally regarded as a safe haven, it has increasingly moved in tandem with other riskier assets dueto investor jitters. Shares on Wall Street turned higher, up less than 1 percent after initially hit by jitters overEurope's debt crisis.   

Spot gold fell 9 cents to $1,779.80 an ounce by 2:40 p.m. EST (1940 GMT), having traded as low as $1,760.04 an ounceearly on Tuesday.    U.S. gold for December delivery settled up $3.80 at $1,782.20.

Trading volume was around one-tenth below its 30-daynorm, above its previous session's turnover and consistent with the recent trading pace.   

Silver rose 0.6 percent to $34.43 an ounce.   

PAULSON CUTS GOLD ETF   

Gold largely held its ground after it was reported that Paulson & Co. cut its holding in the SPDR Gold Trust to 20.3 million shares from 31.5 million at the end of the second quarter, a U.S. regulatory filing showed late on Monday.

Paulson has long been the biggest holder of SPDR shares,using them to hedge currency exposure, while other managers like David Einhorn and Daniel Loeb have favored more discreetinvestments in physical bullion.

Gold is the biggest holding in Einhorn's $8 billion Greenlight Capital, he said last week.   

The move is likely a combination of two unrelated factors: end-of-year client redemptions and a desire to reduce hisexposure to the regulated U.S. ETF in favor of less visible swaps, forwards or physical holdings that are not reported inquarterly 13-F filings, a person familiar with his thinking said.   

I don't think it means anything. It's a technical issue related to the fact that he needed to raise cash to meetperspective redemption from his hedge fund that is having a very difficult year, Mark Luschini, chief investmentstrategist of broker-dealer Janney Montgomery Scott, which manages $54 billion in client assets   

Among platinum group metals, platinum fell 0.2 percent to $1,634.75 an ounce and palladium gained 0.1percent to $660.75 an ounce.

Johnson Matthey Co , the world's top supplier of catalytic converters that use platinum group metals to clean car exhaust, said that palladium prices could climb higher and that investors would be net buyers in 2012 after they sold anestimated 215,000 ounces in 2011.