Gold traded near a two-month peak on Tuesday, as a drop in European stock prices after soft German economic data helped bullion build on last week's gains.
The precious metals pared gains, but remained close to their earlier peaks, after U.S. new-home sales and consumer confidence data beat expectations. Gold posted its biggest weekly rise in three months last week as fighting in Iraq escalated, taking oil to nine-month highs, and as the Federal Reserve's lack of commitment to raising interest rates sparked a wave of short-covering.
Spot gold hit a peak of $1,325.70, but drifted lower to near $1,320 an ounce as traders booked profit. U.S. gold futures for August delivery settled up $2.90 at $1,321.30, while silver reached its highest since mid-March.
Gold posted its biggest weekly rise in three months last week as the threat of escalating tensions in Iraq and the Federal Reserve's lack of commitment to raising interest rates sparked a wave of short covering.