Gold retreats, but Mideast and Ukraine cap the downside


Gold edged lower on Monday, hovering below a three-week high as tensions between Ukraine and Russia eased and investors turned to rising global shares and some withdrew from exchange-traded gold funds.

Late on Friday Russia's Defence Ministry said it had ended military exercises in southern Russia, which the United States had criticised as a provocative step in the Ukraine crisis.

Spot gold was down 0.2 percent at $1,307 an ounce. It reached a three-week high of $1,322.60 on Friday before easing back. U.S. gold futures for December delivery settled down 50 cents at $1,310.50.

Chart: Precious Metals

"If gold did not manage to push higher on the back of all the political tensions over the past few months, there is the risk that it will fall (below $1,300) because on the other side there is the pressure coming from the developments on the Federal Reserve side, the tightening of interest rates and the stronger dollar,'' ABN Amro analyst Georgette Boele said.

Global stocks rose, while the dollar, which lost heavily against the yen last week after U.S. President Barack Obama authorised air strikes in Iraq, was up 0.1 percent against a basket of currencies, boosted by steadier U.S. Treasury bond yields.

A stronger U.S. currency makes dollar-denominated assets such as gold more expensive for other currency holders, while returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest.

Losses in the gold price were kept in check, however, by conflicts in other countries, such as Iraq and Israel.

--By Reuters