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Gold price steadies, U.S. fiscal fears in focus

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SummarySpot gold was up 0.10 percent to $1,696.6 an ounce after falling nearly half a percent in the previous week.

Gold prices rose slightly, erasing earlier losses on Monday, as prospects for monetary stimulus in Japan countered uncertainty over the outlook for U.S. budget talks and a weak chart picture.

Spot gold was up 0.10 percent to $1,696.6 an ounce by 1510 GMT after falling nearly half a percent in the previous week. U.S. gold was up 0.01 percent to $1,695.90.

Japan's next prime minister, Shinzo Abe, buoyed by a landslide election victory, piled pressure on the central bank on Monday as it prepared for a policy meeting, saying voters had overwhelmingly backed his call for aggressive monetary stimulus.

"The increased likelihood of more aggressive monetary stimulus by the Bank of Japan is maybe fuelling the rise in gold prices in the last hour or two," Christin Tuxen, an analyst with Danske Bank, said.

"This news highlights low interest rates for a prolonged period."

Monetary stimulus spurs investment in gold as a hedge against inflationary fears.

Gold briefly rose to a two-week high above $1,720 an ounce last week after the U.S. Federal Reserve pledged to buy $45 billion a month in longer-term Treasuries, a potentially inflationary move that was expected to support gold.

It swiftly retraced those gains, however, in line with other financial markets as investors prepared for year-end.

"Technically the chart is looking more bearish," Tom Kendall, head of precious metals research at Credit Suisse, said.

"The path of least resistance is now to the downside." Prices were drifting towards the low end of recent ranges towards year-end, he said.

Prices last week broke below their 100-day moving average, which had been a strong support level at $1,703 an ounce. Gold is now trading below a number of key moving averages, suggesting the trend in the metal is weak.

On the wider financial markets, European shares and the euro retreated as investors focused on the fast approaching year-end deadline to avoid the imposition of steep tax hikes and spending cuts in the United States, known as the "fiscal cliff".

A new proposal for tax hikes on incomes over $1 million a year from U.S. Republican House Speaker John Boehner on Sunday was seen as a step forward, but it still remained some way from the position of President Barack Obama.

Credit Suisse's Kendall said gold was getting little support from speculation over the cliff at present.

"If the markets were very concerned about the lack of agreement to date or the potential impact of the fiscal cliff in

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