On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,658.75 a troy ounce during European morning trade, down 0.1% on the day.
Prices held in a tight trading range between USD1,654.05 a troy ounce, the daily low and a session high of USD1,660.95 a troy ounce.
Market players remained focused on developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.
President Barack Obama was to end his vacation and return to Washington on Thursday in order to take part in talks to avert the crisis ahead of the year-end deadline. Both chambers of Congress are also due to return to work on Thursday.
Without a deal, the U.S. could fall back into recession and drag much of the world down with it.
In addition, U.S. Treasury Secretary Tim Geithner said Wednesday that the USD16.4 trillion debt ceiling limit will be hit on December 31. Geithner added that "accounting measures" will be taken to create "headroom" in order to delay a technical violation.
The temporary moves would create USD200 billion in "headroom," enough to last for approximately two months under normal circumstances.
Gold prices tumbled to a four-month low of USD1,636.45 a troy ounce late last week, as a bout of technical selling set in after prices broke below their 200-day moving average, triggering fresh sell orders amid bearish chart signals.
Despite losing nearly 4% in December, gold is still up almost 5.5% for the year. It is also set for a 12th straight year of gains, thanks to a rally in the first half of 2012 driven by ultra-low interest rates and aggressive monetary stimulus from global central banks.
Elsewhere on the Comex, silver for March delivery rose 0.1% to trade at USD30.06 a troy ounce, while copper for March delivery added 0.3% to trade at USD3.607 a pound.
Volumes were expected to remain light, with year-end positioning and profit-taking driving flows. Lower-than-usual volumes could spark volatile trading, resulting in rapid changes in metal prices during the final weeks of the year.
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