Gold steady after Europe debt deal, deficit talks eyed

(Reuters) - Gold held steady below $1,600 on Friday, after the euro zone leaders reached an agreement on a Greece bailout plan, but prices are expected to be rangebound as investors keep an eye on the progress made in U.S. debt talks.

Euro zone leaders agreed at an emergency summit on Thursday to give their financial rescue fund sweeping new powers to help Greece overcome its debt crisis and prevent market instability from spreading through the region.

On the other side of the Atlantic, efforts to craft a $3 trillion deficit-reduction deal gained traction as the White House and congressional leaders scrambled to sort through competing options and stave off a devastating default.

Spot gold was flat at $1,588.04 an ounce by 0613 GMT, headed for a weekly decline of 0.3 percent after two weeks of consecutive gains.

U.S. gold was little changed at $1,588.50.

"Gold is consolidating right now after rallying in the last two weeks as we are seeing signs that the debt problem is being solved little by little in Greece," said Dick Poon, manager of precious metals in Heraeus, based in Hong Kong.

"A $10, $20 correction will be welcomed by investors."

Technical analysis indicated that gold would fall into a range of $1,565 and $1,576 in the short term, said Reuters market analyst Wang Tao.

Although gold might face short-term headwind, its long-term appeal remains, as the trouble with fiscal conditions in euro zone nations as well as the United States may continue to drive investors to seek safety in bullion.

"U.S. debt talks are only of mild interest to me," said a Singapore-based trader, "the more important thing is the long-term implication -- U.S. government bonds used to be called 'risk-free asset' and now we are seeing that concept fade away."

Precious metals look increasingly appealing to investors and governments alike, as choices of safe-haven investment are running short as the global economy faces a cloudy future.

Spot silver edged down 0.5 percent to $39.08, on course for a 0.5 percent weekly loss. U.S. silver gained 0.4 percent to $39.10.

The Hong Kong Mercantile Exchange started trading a dollar-denominated silver futures contract on Friday. The contract for September delivery was quoted at $39.18 an ounce.

The new contract aimed at attracting investors from mainland China, but will take time to gain popularity as it faces tough competition from the dominant COMEX trading in Asian hours, traders said.

Spot palladium lost 0.2 percent to $803.97 an ounce, leading the precious metals complex with a 4.2-percent weekly rise, as platinum group metals tracked strength in the stocks market.

Spot platinum was nearly flat at $1,781.24, headed for a 2-percent rise from a week earlier.