* Silver tracks gold higher, hits two-week high
* Coming Up: U.S. Gross Domestic Product Q1-P; 1230 GMT (Updates prices, activity in physical market)
By Lewa Pardomuan
SINGAPORE, May 26 (Reuters) - Gold edged up on Thursday to near its strongest level in three weeks on concerns over Europe's sovereign debt crisis, while silver reached a two-week top, catching up with bullion's gains.
Europe's policy options to avert a Greek debt default appeared to be dwindling, sparking fears of a chain reaction affecting other heavily indebted countries in the 17-nation currency bloc.
Spot gold added $5.95 to $1,529.25 an ounce by 0519 GMT after rising as high as $1,532.10 on Wednesday, its strongest since May 4. Bullion struck a record above $1,575 in early May.
"We still think that concerns about the ability of the EU to manage Greece's sovereign debt problems and potential contagion to other peripheral countries will be supportive for gold," said Natalie Robertson, commodities strategist at ANZ.
"After this heavy sell off at the beginning of the month, silver is kind of retracing some of those gains. When gold prices will go up, silver prices will go up even more. It's a little bit more volatile than the gold market."
Spot gold is due for a correction, as it may end its current exhausted rebound around $1,536 per ounce, according to Wang Tao, who is a Reuters market analyst for commodities and energy technicals.
In the physical market, jewellers from Indonesia cashed in on gold after recent gains in prices, but main consumer India was chasing bullion as the wedding season progresses.
Annual gold production in China, the second-largest consumer of the precious metal, is expected to be 400 tonnes in three years' time, with demand at 700 tonnes, the head of the country's largest state-owned gold miner China National Gold Group said on Thursday. [ID:nB9E7FQ02L]
SILVER AT TWO-WEEK PEAK
Silver hit an intraday high of $38.62 an ounce, its strongest since May 11, but there was hardly any activity in the physical sector.
Silver touched a record at $49.51 in late April before falling sharply on a broad sell-off in commodities and after exchange operators in Shanghai and New York raised the amount of money required to trade silver futures.
The CME Group may bring down margins over time once the market volatility eases, Harriet Hunnable, CME managing director for metals products, told Reuters in a phone interview.
CME, operator of the world's leading energy, grain and precious metal markets, hiked trading margins for silver five times over a two-week period up to May 9 by a total of about 84 percent. [ID:nL3E7GQ0D5]
"I guess some clients who got stuck during the last correction would be happy to see this current price and silver is moving in tandem with gold," said a physical dealer in Singapore.
"I hope there is some physical silver to sell after a short break, then it will be good for us."
Holdings of the largest silver-backed ETF, New York's iShares Silver Trust , dropped 1.43 percent from Tuesday to Wednesday, while, the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust remained unchanged for the same period.
EURO-PRICED GOLD HOLDS NEAR RECORD
Euro-denominated gold held near a record just above 1,088 euros an ounce struck on Wednesday.
The euro advanced to a one-week high against the dollar on as strong commodities prices and a report that China is interested in buying "bailout bonds" for Portugal spurred active stop-loss buying of the single European currency.
But lingering uncertainty over debt problems in Greece and other euro-zone countries was expected to limit strong follow-through moves.
The Greek government sought consensus on Wednesday for tough measures to exit the debt crisis as Greece's EU commissioner warned that its euro membership was at risk if it failed to agree to sacrifices.[ID:nLDE74O1MZ]
In other markets, Asian stocks were on course for their biggest gain in a month, led by resources and consumer sectors, with recovering commodity prices and the euro's rebound toward $1.42 bringing investors back into the markets in search of bargains. Precious metals prices 0519 GMT Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 1529.25 5.95 +0.39 7.74 Spot Silver 38.47 0.59 +1.56 24.66 Spot Platinum 1784.50 7.80 +0.44 0.96 Spot Palladium 745.80 0.67 +0.09 -6.72 TOCOM Gold 4027.00 10.00 +0.25 7.99 36856 TOCOM Platinum 4744.00 48.00 +1.02 1.02 8407 TOCOM Silver 101.00 5.20 +5.43 24.69 3018 TOCOM Palladium 1978.00 35.00 +1.80 -5.67 183 Euro/Dollar 1.4155 Dollar/Yen 81.72 TOCOM prices in yen per gram. Spot prices in $ per ounce. (Editing by Himani Sarkar)