US President Barack Obama and House of Representatives Speaker John Boehner met on Thursday as frustration mounted over the stalemate in negotiations on the "fiscal cliff" -- $600 billion worth of tax hikes and spending cuts that kick in early next year and threaten to push the economy into recession.

Spot gold was flat at $1,696.61 an ounce by 0302 GMT, after an almost 1 percent drop on Thursday. Prices were headed for a 0.5-percent weekly drop.

US gold traded little changed at $1,698.10.

"It is hard to glean a real trend as everyone has closed down for the year," said a Sydney-based trader, adding that the sell-off on Thursday was a result of position liquidation by funds to lock in profit for the year.

The thinning liquidity before the year end contributed to a lack of momentum in the market.

Spot gold is on track for a twelfth straight year of gains, boosted by stimulus measures from central banks that have driven investors to the safety of gold amid worries rampant cash printing will make paper money worthless.

The Fed announced more bond buying earlier this week, but raised concerns about the scope of the measure by linking its monetary policy to unemployment.

In Asia's physical bullion market, there was light buying as the price decline failed to excite potential buyers, dealers said.

"Jewellers are not keen to buy at this level," said a Singapore-based dealer. "They think if we can break below $1,700, there is probably more room on the down side."

In other precious metals, spot palladium rose 0.7 percent to $694.00, headed for a 0.2-percent fall from a week earlier, snapping a six-week winning streak.

Spot silver was up 0.3 percent to $32.62, rebounding from a near one-month low of $32.21 hit in the previous session. The metal was also headed for a third straight weekly fall, its longest losing run in nearly seven months.