(Reuters) - U.S. gold fell more than 1 percent on Friday, weighed down by a weaker euro, as investors worried about the fate of Greece's bailout deal and chose to ignore a margin cut in U.S. gold contracts.
Spot gold lost 0.6 percent to $1,720.34 an ounce by 3:19 a.m. ET, headed for a third session of losses.
U.S. gold tumbled as much as 1.4 percent to $1,717.2, before paring some losses to $1,722.90. Traders said the rapid decline was triggered by stop-loss selling as prices approached $1,725.
Spot gold was also headed for a 0.4-percent weekly fall, its second consecutive week of declines, after following the ups and downs of Greece's struggle to agree to reforms and austerity measures in exchange for an economic rescue package.
Although Greek political leaders clinched a deal at the last minute, the bailout is still pending approval of international lenders, keeping investors guessing and pulling the euro off two-month highs against the dollar and the yen.
Even a cut in COMEX gold trading margins by the biggest operator of U.S. futures exchanges, the CME Group, failed to spark investors' enthusiasm.
"Many are still standing on the side waiting for something new to happen in the market," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
"COMEX cut margins probably because the market volatility was low and people didn't have much interest," he added.
The CME Group (CME.O) on Thursday lowered trading margins for a range of commodities contracts, including gold, silver and platinum, effective after the close of business on Monday. This is the first margin cut for COMEX gold since June 2011.
Technical analysis suggested spot gold could fall to $1,698 during the day, Reuters market analyst Wang Tao said.
Asia's physical market remained subdued, as the tight range in prices sapped trading interest, dealers in Hong Kong and Singapore said.
"My phone hasn't rung for a long while," said a Singapore-based dealer. "Unless prices break above $1,755 or below $1,700, physical buyers aren't interested."
Traders feel reluctant to make bullish bets for now, but analysts said gold remains a solid longer-term investment due to the murky economic outlook and geopolitical tensions.
SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, reported that its holdings increased to 1,278.344 tonnes by February 9, the highest level since late December.
The total amount of gold held by gold ETFs was little changed from a week earlier, after four weeks of gains.
Spot platinum declined half a percent to $1,644.50, headed for a 1.6-percent weekly rise, its sixth straight week of gains. An 18-percent year-to-date rise helped platinum narrow its discount to gold to near $70 earlier this week, its lowest in more than four months.
Concerns about supply shortfalls in South Africa, the world's top producer of the metal, may continue to support platinum prices and lower its discount to gold, analysts said.
