Gold prices edged down on Tuesday on a firmer dollar and a rise in US Treasury yields and as investors' reaction to the dispute between the United States and Iran remained muted. Spot gold was down 0.3 percent at $1,220.27 an ounce at 0703 GMT.
US gold futures for August delivery were 0.4 percent lower at $1,220.20 an ounce. The dollar index, which measures the greenback against a basket of six major currencies, was up 0.2 percent at 94.838. It hit a one-year high of 95.652 last week.
"In addition to the US dollar, there has been little follow through on the Trump and Rouhani war of words and frankly the overall reaction on risk sentiment was muted," said Stephen Innes, APAC trading head, OANDA. "I think the market realises the chance of this escalation leading to a US military reprisal is overblown."
Iran on Monday dismissed an angry warning from US President Donald Trump that Tehran risked dire consequences if it made threats against the United States. Gold prices, which usually gain in times of political and financial instability, have failed to do so, analysts noted.
"The fall in both oil and gold prices overnight is a testament that investors are likely focused on oversupply risks rather than on geopolitical risks which are traditionally short-lived in nature," OCBC said in a commentary on Tuesday. Spot gold looks neutral in a range of $1,214-$1,237 per ounce, Reuters technical analyst Wang Tao said.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.55 percent to 802.55 tonnes on Monday, its highest in over two weeks.
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