SINGAPORE: Gold inched lower on Wednesday as the dollar firmed after Greece's lenders failed to strike a debt deal for the country, although sentiment for bullion remains supported by expectation of continuous monetary easing by central banks. Gold has settled in a range of $1,700 to $1,740 an ounce in the past two weeks, after the re-election of U.S. President Barack Obama cheered gold buyers who expect a continued loose monetary policy to keep gold attractive as an inflation hedge. "Gold seems well supported towards the $1,700 level, and the longer-term story hasn't changed much," said Nick Trevethan, senior commodity strategist at ANZ in Singapore. Resilient Chinese demand, as well as official sector's gold purchases are expected to support bullion prices, he added. China's consumer physical gold demand rose 22 per cent from the previous quarter to 176.8 tonnes in the third quarter, and could further improve as year-end holidays encourage gold purchases, said the World Gold Council. Spot gold inched down 0.2 per cent to $1,724.98 an ounce by 0842 GMT, hurt by a drop in the euro. U.S. gold was little changed at $1,725.10. The euro weakened against the dollar as after nearly 12 hours of talks through the night, euro zone finance ministers, the International Monetary Fund and the European Central Bank failed to reach a consensus, without which emergency aid cannot be disbursed to debt-laden Athens. A strong dollar weighs on commodities priced in the greenback, including gold, as it makes them more expensive for buyers holding other currencies. The dollar was on course for its biggest daily rise in more than two weeks against a basket of currencies. But losses in bullion were checked by tensions in the Middle East that increased the precious metal's safe-haven appeal. An exchange of fire between Palestinians and Israelis continued as U.S. Secretary of State Hillary Clinton held talks in Jerusalem seeking a truce. A failure to reach a cease-fire would further support gold's safe-have appeal. Traders are now eyeing U.S. talks on a looming "fiscal cliff", $600-billion in tax hikes and spending cuts due to roll in early next year that could push the country into a recession. Federal Reserve Chairman Ben Bernanke said on Tuesday the central bank does not have the tools to offset damage caused by the fiscal cliff if the Congress fails to reach an agreement. Traders and analysts expect gold to remain rangebound while the budget talks continue, but say the longer-term outlook for gold remains upbeat. Physical demand in Asia remained lacklustre as potential buyers tightened their purse strings with the market showing no clear direction. "Physical demand is very, very bad," said a Singapore-based trader. "If prices drop another $30 to $50, we will probably see investors and physical buyers return."

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