SINGAPORE: Gold edged down below $1,700 an ounce on Friday, heading for its second straight weekly fall, as the euro extended losses on growing fears the two-year-old debt crisis in Europe would drag on and eventually trigger a credit crunch. Instead of rising in times of uncertainty, gold's safe-haven appeal was robbed by declines in equities, which prompted investors to cash in to cover losses caused by the crisis in Europe. A firm US dollar also capped gains. "It's really draining the liquidity and it triggers, let's say, economic crisis, a stronger dollar overall. It will be tough. Technically, it doesn't look that great," said Dominic Schnider, an analyst at UBS Wealth Management. "In such an environment, for gold to really see firm price advances is quite challenging," said Schnider, adding that a positive outcome to the problems in Europe could be supportive for gold. Spot gold slipped 0.51 per cent to $1,685.79 an ounce by 0626 GMT, down from a lifetime high around $1,920 struck in September, with physical buying from jewellers also drying up. US gold for December contract fell $9 to $1,686.9 an ounce. Asian shares slipped on Friday as European officials failed to soothe investor fears that the euro zone's debt crisis could trigger a credit crunch if funding costs run out of control. France and Germany agreed to stop bickering openly over whether the European Central Bank should do more to rescue the euro zone from a deepening sovereign debt crisis, while expressing their backing for Italian Prime Minister Mario Monti in his task of overcoming the country's massive debt burden. The euro hit a seven-week low as it struggled to find any traction with markets seeing no end in sight for the euro zone debt crisis. Physical gold buyers in Asia waited for prices to slip further, with Thanksgiving holiday in the United States also affecting liquidity. "I think sentiment in the physical side is not that bearish, but the funds are more cautious because of fears of recession," said a dealer in Hong Kong, adding that a recent drop in prices had attracted purchases from jewellers. "The funds are worried that their clients will redeem assets to get more cash on hand." In top gold consumer India, the wedding season which is traditionally a moment for splurging on gold has yet to boost demand, with local futures prices still hovering near all-time highs due to a weak rupee. India gold prices are likely to fall more than 3.5 per cent from its peak after a 16 per cent rally last quarter as investors resort to year-end profit-taking while tepid wedding demand weighs, a Reuters poll of banks and brokerages found. India's gold demand, which recorded a fall of 20 per cent in the September quarter, could rise in the last quarter and surpass the 1,000 tonnes demand mark in 2011, according to the World Gold Council figures.

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