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Gold slips as US dollar steadies; North Korea headlines in focus

[BENGALURU] Gold fell on Monday as the US dollar inched up from last week's lows, but held near two-month highs touched on Friday as investors kept a close watch on any developments on tensions over the Korean peninsula.

Spot gold was down 0.2 per cent at US$1,286.39 per ounce by 0657 GMT, after marking its highest since June 7 at US$1,291.86 an ounce in the previous session.

US gold futures for December delivery fell 0.12 per cent to US$1,292.4 per ounce.

"Maybe geopolitical tensions are easing so it's natural for gold to come down a bit ...But it's very unpredictable because prices could rise to another high because of some change," said Richard Xu, a fund manager at China's biggest gold exchange-traded fund, HuaAn Gold.

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"After the sharp sell off in the US dollar, over the weekend nothing happened so I guess the threat from the (Korean) peninsula is low, but we think gold fundamentals are strong," Mr Xu said.

The US dollar on Monday edged higher against the yen, trading above last week's near four-month low, with rising tensions between the United States and North Korea seen as the key to the near-term outlook.

The dollar index , which measures the greenback against a basket of major currencies, was largely unchanged at 93.115.

President Donald Trump issued a new threat to North Korea on Friday, saying the US military was "locked and loaded" as Pyongyang accused him of driving the Korean peninsula to the brink of nuclear war and world powers expressed alarm.

Geopolitical risks can boost demand for assets considered safe-haven investments, such as gold.

"Although more aggressive rhetoric between the US and North officials would temporarily boost gold prices, we see outright military action as unlikely and upward pressure on gold prices stemming from the confrontation as limited," John Davies, Global Commodities Strategist at BMI Research said in a note.

Meanwhile, a lower-than-expected rise in US consumer prices in July suggesting benign inflation could persuade a cautious Federal Reserve to delay raising interest rates until December.

Gold is highly sensitive to rising interest rates, as these increase the opportunity cost of holding non-yielding bullion.

Spot gold faces a strong resistance at US$1,291 per ounce, it may hover below this level or retrace to a support at US$1,278, according to Reuters technical analyst Wang Tao.

Among other precious metals, silver was up 0.22 per cent at US$17.10 per ounce, after hitting its highest since June 14 at US$17.24 an ounce on Thursday.

Platinum fell 0.51 per cent to US$974.74 per ounce, while palladium rose 0.22 per cent at US$894.50 per ounce.