Gold falls as N. Korea tensions ease, dollar gains

Gold dropped by half a percentage point on Monday, retreating from two-month highs under pressure from a strengthening dollar and a slight easing of tensions between the United States and North Korea.

Though North Korea`s Liberation Day celebration on Tuesday could raise the temperature again, markets were relieved that the weekend passed without more inflammatory rhetoric.

Elsewhere, the dollar rose from last week`s four-month lows against the yen and traded up against a currency basket, making dollar-priced gold costlier for non-U.S. investors.

"A lot of the negative news is priced into the dollar. That, combined with no real escalation in North Korea, should lead to lower gold prices, though it doesn`t mean we expect a very negative trend. We`ll stay within the $1,200 to $1,300 range for the year," said ABN Amro strategist Georgette Boele.

Spot gold fell 0.6 percent to $1,280.45 an ounce by 1004 GMT, having reached its highest since June 7 at $1,291.86 in the previous session.

U.S. gold futures for December delivery fell 0.6 percent to $1,286.90.

Consumer prices in the United States rose less than expected in July, data showed on Friday, suggesting benign inflation that could persuade a cautious Federal Reserve to delay raising U.S. interest rates until December.

"As a result (of the weak inflation data), rate hike expectations according to the Fed Fund Futures have dropped to their lowest level since November, which should benefit gold," Commerzbank said in a note.

Gold is highly sensitive to rising interest rates because they increase the opportunity cost of holding non-yielding bullion.

Hedge funds and money managers boosted their net long, or buy, position in COMEX gold for the fourth straight week to a near two-month high in the week to Aug. 8, data showed on Friday.

Spot gold faces strong resistance at $1,291 an ounce and could hover below this level or retrace to support at $1,278, said Reuters technical analyst Wang Tao.

Among other precious metals, silver fell 0.5 percent to $16.98 per ounce, having climbed last week to its highest since mid-June.

Platinum fell 1.2 percent to $968.50 after hitting a five-month high on Friday, while palladium rose 0.1 percent to $893.40.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)