Gold bounces on U.S. dollar but near four-month low

A woman serves customers at a jewellery stand at a shopping mall in central Beijing December 6, 2012.

SINGAPORE (Reuters) - Gold regained strength on Wednesday as the U.S. dollar weakened against the euro, but the metal was still within sight of its weakest in nearly four months after signs of progress in the U.S. fiscal talks dented its safe haven appeal.

FUNDAMENTALS

* Gold added $5.85 an ounce to $1,675.39 by 0032 GMT after falling to $1,661.01 on Tuesday, its lowest since August on technical selling and growing hopes U.S. legislators are closer to reaching a deal that would avert a fiscal crisis next month.

* U.S. gold futures for February rose $6.20 an ounce to $1,676.90.

* U.S. House of Representatives Majority Leader Eric Cantor said he expects a vote on a Republican offer to avert the "fiscal cliff" on Thursday, and he expects to have enough votes to pass the measure.

MARKET NEWS

* The euro hovered at multi-month highs against the dollar and yen on Wednesday, having extended recent gains as tentative signs of progress in the U.S. fiscal talks bolstered demand for riskier assets. A weaker dollar makes dollar-priced gold cheaper for holders of other currencies.

* Japan's Nikkei share average is set to test eight-month highs above 10,000 on Wednesday as investor appetite is boosted by signs of progress in the U.S. fiscal talks and expectations of aggressive monetary easing under the new Japanese government.

(Reporting by Lewa Pardomuan; Editing by Ed Davies)