Gold dips on profit taking after touching 7-week high

[LONDON] Gold prices edged lower on Tuesday, having touched the highest levels in almost seven weeks a day earlier, as the US dollar rose and investors locked in profits from bullion's rally last month.

Spot gold dipped 0.1 per cent to US$1,268.25 per ounce by 1350 GMT. It rose 2.2 per cent last month, its biggest monthly gain since February.

US gold futures for August were up 0.1 per cent at US$1,268.10 per ounce.

"In the short term there are technical indications that gold is overstretched, and when we've had a move of nearly three weeks of straight gains there's danger of profit taking," said analyst Jonathan Butler at Mitsubishi in London.

At its peak on Monday, gold had gained about US$66 since rebounding from a near four-month low of US$1,204.45 on July 10.

The US dollar edged higher on Tuesday as investors consolidated positions, a day after fresh political turmoil in Washington caused the US currency to post its biggest monthly drop in 16 months.

A firmer US dollar makes commodities such as gold that are priced in the greenback more expensive to buyers outside of the United States.

Butler said despite any short-term correction, gold was poised to move higher.

"Yesterday for the first time on a monthly close, gold broke above a downtrend that had prevailed since the high in 2011.

This is quite a bullish technical signal and potentially demonstrating the start of a new trend." Political instability in the United States after President Donald Trump ousted recently hired White House communications chief Anthony Scaramucci on Monday could support gold in coming months, Mr Butler added.

Gold is often used as an alternative investment during times of political and financial uncertainty.

Investors are also looking ahead to the US non-farm payrolls data later this week and how that will affect the US dollar.

"We continue to expect the Fed to remain on hold in the coming months, and then to hike by 25 basis points in December, while the balance sheet adjustment should be gradual, setting a favourable backdrop for gold," Standard Chartered analyst Suki Cooper said in a note.

In other precious metals, silver fell 0.4 per cent to US$16.73 per ounce. It hit a more than one-month high in the previous session and rose 1.3 per cent in July.

"Silver was given some support by firm base metals prices yesterday, causing the gold/silver ratio to drop slightly to its lowest level since the end of June," Commerzbank said in a note.

Palladium gained 1.2 per cent to US$893.20 per ounce, after it hit a near seven-week high of US$897.05 in the previous session. It rose almost 5 per cent in July.

Platinum climbed 0.8 per cent to US$942.75 per ounce, after rising to US$945.60, a high since June 14. It rose almost 5 per cent in July, its first monthly gain since February.

REUTERS