Gold prices gained on Monday following a steep fall in the previous session as tensions in the Middle East and weaker financial markets supported the metal, while a stronger dollar kept a lid on gains. Spot gold was up 0.2% at $1,427.31 per ounce, as of 0735 GMT. The metal hit $1,452.60 in the previous session, its highest since May 2013, before closing 1.5% lower. US gold futures were up 0.1% at $1,427.80 an ounce.
"Over the weekend, what happened between Iran and the United Kingdom is supporting gold prices today," said Brian Lan, managing director at dealer GoldSilver Central in Singapore. "Also, equities are lower and at this point of time with geo-political tensions and the Fed looking to cut rates, gold looks attractive, but people are worried about the stronger dollar."
Likelihood of a smaller rate cut from the US central bank lifted the dollar, making gold expensive for investors holding other currencies. Expectations for a rate cut of half a percentage point at the Fed's July 30-31 meeting edged out further on Monday to hit 14.5%, according to CME's FedWatch tool, down from as high as 71% last week.
"Geopolitical risks from the Persian Gulf could provide some support for the yellow metal, but the next major move will likely be if the Fed is dovish enough for markets," Edward Moya, a senior market analyst at OANDA, said in a note. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.72% to 820.49 tonnes on Friday from Thursday. Hedge funds and money managers raised their bullish stance in COMEX gold in the week to July 16, the US Commodity Futures Trading Commission (CFTC) said in a report on Friday.
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