* 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 cliff" talks. 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 central banks. 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 prices. "Definitely, there's physical buying. It's from all over the place. Physical dealers are buying," said a physical trader in Singapore. 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 Euro/Dollar 1.3206 Dollar/Yen 84.02 (Editing by Himani Sarkar)
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