Gold traded steady Monday after its biggest weekly loss since September, as investors remained cautious even after Spain's center-right opposition won a landslide victory in the election and is expected to launch drastic austerity measures.
Market reaction to the news has been wary, with Asian shares dipping and the euro holding steady.
Gold has moved in tandem with riskier assets, and is still in danger of suffering sharp losses in case of selloffs in other markets, as investors would have to liquidate their gold positions to cover losses elsewhere since funding has become difficult during the market turmoil in recent months.
We still have not seen the light at the end of the tunnel yet, said Ong Yi Ling, an analyst at Phillip Futures. We will continue to have headlines from Europe to dominate the sentiment in the market.
Market sentiment also dimmed after Washington's most ambitious effort in years to come to grips with its mounting debt appeared set to end with a whimper on Monday as negotiators plan to announce they have failed to reach a deal.
Spot gold inched down 0.3 percent to $1,721.04 an ounce by 0721 GMT, after a weekly decline of more than 3 percent.
On the chart, the 50-day moving average is almost crossing below the 100-day moving average, seen as a bearish technical signal.
U.S. gold inched down 0.2 percent to $1,722.50, after having fallen to as low as $1,713.2 earlier in the day.
Technical analysis suggested that spot gold could fall toward $1,687 an ounce during the day, said Reuters market analyst Wang Tao.
Ong of Phillip Futures expected the $1,700 level to provide support, and said prices could slump toward $1,600 once that level is breached convincingly.
Asia's physical market remained muted as buyers held off for lower prices.
Prices didn't correct enough. Prices need to go below $1,700 and stay, otherwise people won't buy, said a Singapore-based dealer.
Investment interest in gold remained strong last week, despite the 3-percent price slump, as money managers upped their positions in goldfutures and options.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported a rise of 3.631 tons from a day earlier to 1,293.088 tons in its holdings, the highest in more than three months.
The ETF witnessed an inflow of 24.422 tons last week, the biggest one-week rise in holdings since mid-August.
Spot silver led the decline in the precious metals complex, down as much as 1.6 percent to $31.86, before recovering to $32.04.
China's October silver imports dropped 26 percent on the year, and the total inflow in the first 10 months of the year slumped 28 percent, the official trade data showed.
Platinum imports in October jumped 65 percent on the month to 6,340 kilograms, as platinum prices wallowed in discount over $100 to gold and attracted buying. Year-to-date imports of platinum rose 14 percent on the year to 66,680 kilograms.