* Soft euro, stalled U.S. fiscal talks hurt gold
* Gold to retest support at $1,631 -technicals
* Coming up: CFTC commitment of traders data; 1930 GMT
(Adds weekly milestone, updates prices)
By Lewa Pardomuan
SINGAPORE, Dec 21 Gold slipped on Friday,
holding near a four-month low hit in the previous session and on
track for its steepest weekly drop since June, as the euro
softened and U.S. talks to avoid a fiscal crisis stalled again,
turning away investors.
Gold initially rose before losing strength after House of
Representatives Speaker John Boehner failed to unite his
Republican lawmakers behind an effort designed to extract
concessions from President Barack Obama in year-end "fiscal
The latest development cast more uncertainty on the talks to
avoid across-the-board tax hikes and spending cuts that could
push the U.S. economy into recession in 2013, which in theory
could lift gold's safe-haven appeal.
"At the moment, the U.S. budget talks are stalling. Many are
unsure if they should enter the market. Perhaps when the U.S.
has more concrete news on the outcome, investors will be more
comfortable taking positions again," said Brian Lan, managing
director of GoldSilver Central Pte Ltd in Singapore.
"The market volume is thin amidst all these uncertainties,
and the year is coming to an end. Many of the investors prefer
to take profits and just leave the market."
Gold fell $1.38 an ounce to $1,645.76 by 0648 GMT,
after hitting a low of $1,635.24 earlier, just shy of a
four-month low of $1,635.09 touched in the previous session.
U.S. gold for February added $1 an ounce to
$1,646.90 after hitting a low around $1,636.
Both spot gold and U.S. gold are on track for a fourth
straight weekly drop and have so far shed about 3 percent -
steepest since late June.
"Gold and silver will tend to dip before they come up again
as investors see them as risky assets together with equities,"
said Lan at GoldSilver Central Pte Ltd.
"Somehow, gold and silver at this point of time haven't been
regarded as a safe haven asset. The safe haven status will be
reinstated during a financial crisis."
Shares dipped in Asia and the euro fell against the dollar
as the U.S. fiscal talks stumbled.
But the White House pledged on Thursday to work with
Congress, saying that President Barack Obama is hopeful a deal
could be reached quickly.
Despite the sell-off, gold is up about 5 percent for the
year and set for a twelfth straight annual growth driven by
rock-bottom interest rates, concerns over the financial
stability of the euro zone and diversification into bullion by
Iraq made its first major move in years to boost its gold
reserves in recent months, while Brazil increased its holdings
of bullion by almost a third in November, data from the
International Monetary Fund showed on Thursday.
Lower gold prices spurred buying in the physical market,
keeping premiums steady at $1 to $1.10 an ounce above London
"Definitely, there's physical buying. It's from all over the
place. Physical dealers are buying," said a physical trader in
Precious metals prices 0648 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1645.76 -1.38 -0.08 5.24
Spot Silver 29.84 -0.10 -0.33 7.76
Spot Platinum 1545.74 0.49 +0.03 10.96
Spot Palladium 672.75 -4.50 -0.66 3.10
COMEX GOLD FEB3 1646.90 1.00 +0.06 5.11 28045
COMEX SILVER MAR3 29.89 0.21 +0.71 7.08 7551
(Editing by Himani Sarkar)