* Spot gold headed for 1-pct weekly fall
* Spot gold to test support at $1,701/oz -technicals
* Coming Up: U.S. industrial output, Oct; 1415 GMT
(Updates prices; adds details)
By Rujun Shen
SINGAPORE, Nov 16 Gold traded slightly lower on
Friday, heading for a weekly loss of about 1 percent, as
festering uncertainty over the outlook for the global economy
dragged on prices.
The U.S. "fiscal cliff" -- tax hikes and spending cuts of
nearly $600 billion that will kick in early next year if
Congress fails to avert them -- is looming as a major concern in
financial markets as it threatens to push the world's top
economy back into recession.
Gold's safe haven status would shine in the case of failed
talks and political paralysis, while success in avoiding the
fiscal disaster may dampen sentiment in gold, analysts said.
"If we don't see an agreement and there is a gridlock, it
will burden the dollar and benefit gold," said Dominic Schnider,
an analyst at UBS Wealth Management in Singapore.
The more probable result would be a compromise that did not
completely solve the fiscal problem, which would also benefit
gold, since the Federal Reserve would have to provide more
stimulus to help the economy, he added.
"It is not going to be easy, and it will likely motivate
renewed interest in demand for gold," Schnider said.
Spot gold edged down 0.1 percent to $1,713.19 an
ounce by 0750 GMT, on track for a weekly loss of 1 percent,
after prices climbed more than 3 percent the prior week.
U.S. gold was little changed at $1,713.60.
Technical analysis suggested that spot gold could test
support at $1,701 an ounce, a break below which will open the
way towards $1,672.24, said Reuters market analyst Wang Tao.
CME CUTS GOLD, SILVER MARGINS
The CME Group cut margins on gold and silver futures
contracts in a bid to stimulate trading interest.
Gold has drifted around $1,720 an ounce over the past week
or so as support from U.S. President Barack Obama's re-election
faded and political uncertainty around the fiscal problems kept
some investors on the sidelines.
But gold investment demand remains resilient. Holdings of
the SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, rose to 1,339.616 tonnes by Nov. 15, just
a touch off the record high of $1,340.521 tonnes hit in October.
Prominent hedge fund manager John Paulson kept a major stake
in gold in the third quarter of 2012, a confidence boost to
bullion's appeal as a hedge against economic uncertainty, a U.S.
regulatory filing showed on Thursday.
Worries about the euro zone economy remain, as the region's
debt crisis dragged the bloc in the third quarter into its
second recession since 2009, despite modest growth in Germany
Asia's physical gold market was lacklustre as prices settled
into range-trade mode, dealers said.
Precious metals prices 0750 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1713.19 -2.00 -0.12 9.55
Spot Silver 32.39 -0.20 -0.61 16.97
Spot Platinum 1557.99 -11.25 -0.72 11.84
Spot Palladium 621.47 -7.75 -1.23 -4.76
COMEX GOLD DEC2 1713.60 -0.20 -0.01 9.37 13456
COMEX SILVER DEC2 32.39 -0.28 -0.87 16.03 4830
COMEX gold and silver contracts show the most active months
(Editing by Clarence Fernandez)