Gold near four-month low; US budget talks watched

Gold regained some footing on Friday as the euro stayed near an eight-month high against the dollar and talks to avoid a fiscal crisis in the United States seemed to stall again, but the metal was still on track for its fourth weekly fall.

Fundamentals

* Gold was little changed at USD 1,647.06 an ounce by 0045 GMT after falling to its weakest level since August in the previous session on heavy liquidation by hedge funds and signs of an improving US economy.

* US gold for February rose USD 2.30 an ounce to USD 1,648.20.

* The US House of Representatives abruptly recessed on Thursday amid uncertainty whether Republicans had the votes needed to pass a "fiscal cliff" tax plan offered by Speaker John Boehner.

* Iraq made its first major move in years to bolster 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.

Market News

* Despite the euro zone's own debt problems, the euro was on track to end the year some 2 percent higher against the greenback. It was at USD 1.3251, near an eight-month high around USD 1.3309 set this week.

* Japan's Nikkei share average rose on Friday and may test a nine-month high after Wall Street stocks climbed on hopes for progress in US fiscal talks, with exporters gaining on a weaker yen.

* US crude stayed above USD 90 a barrel after five days of gains, though prices pulled back a touch on caution over US budget talks as Republicans in the US Congress pushed ahead with a plan that stands no chance of becoming law.