Gold fell on Monday as the 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 percent at $1,286.39 per ounce by 0657 GMT, after marking its highest since June 7 at $1,291.86 an ounce in the previous session.
US gold futures for December delivery fell 0.12 percent to $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.
"After the sharp sell off in the dollar, over the weekend nothing happened so I guess the threat from the (Korean) peninsula is low, but we think gold fundamentals are strong," Xu said. 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 $1,291 per ounce, it may hover below this level or retrace to a support at $1,278, according to Reuters technical analyst Wang Tao.