Gold dropped to a four-month low on Wednesday, pressured by a weaker euro as investors fretted about the political upheavals in Greece that threaten to sink the country into chaos and endanger the euro zone's efforts to end the debt crisis.

Spot gold lost more than 1 percent to a four-month low of $1,586.74 an ounce, extending a 2-percent slide from the previous session. It stood at $1,588.64 by 00:13 EDT (04:13 GMT).

U.S. gold also dropped to a four-month trough, at $1,589.50.

The leftwing leader who was mandated to form a government in Greece has so far failed to do so after Sunday's election, as his opposition to a bailout deal seen crucial for the economy alienated mainstream parties and shook market confidence that the euro zone will pull itself out of the debt crisis.

Nervous investors sought out safe haven assets such as the dollar and German Bund, while gold remained lock-stepped with the euro and riskier assets.

The euro was headed for its eighth straight session of losses against the dollar and fell close to a recent three-month low.

"The situation is Europe is difficult, but what's happening is that anything that's slightly tainted with risk is being sold, even though the real risk associated with that product is less than one could justify by its price movements," said Nick Trevethan, senior metals strategist at ANZ in Singapore.

Analysts expected the next level of support for gold to be $1,580 after it broke through $1,620, the lower end of the price range it had held for a month and the psychologically important $1,600 level in just one day.

Dealers spotted a pickup in physical buying in the Asian market, as market participants sought to take advantage of the sharp slide in prices after weeks of largely range bound prices.

"There is a lot of buying on the physical side despite the fact that prices are still sliding, as people are comfortable buying at prices below $1,600," said a Singapore-based dealer.

Spot silver broke below $29 an ounce for the first time in nearly four months, and recovered slightly to $29, Reuters reported.

"Watch out for silver prices to go even lower," said Trevethan of ANZ, "With base metals under pressure, oil prices falling and broad weakness in most markets, there is scope for silver to fall further especially given its volatility."

The gold-silver ratio, used to measure how many ounces of silver is needed to buy an ounce of gold, rose to 54.85, its highest level since mid January.

Forex Videos »

Insecurity in Mali worsens food crisis

Nigeria's apparent complacency about Western oil companies' theft-Africa Today-06-19-2012

Is British/Canadian desperation for Tanzanian gold a result of recession?-Africa Today-06-12-2012

OPEC Expected to Reduce Output If Oil Falls Further