Gold steadies after hitting 5-month peak as political tensions simmer

Gold steadied on Wednesday after hitting a five-month peak as political tensions simmered, leaving investor interest in safe havens like the precious metal largely intact.

Tarnishing an otherwise brightening outlook for global growth, tensions continued to boil in the Korean peninsula and the Middle East, while worries over the upcoming French presidential election persisted.

Spot gold inched down 0.11 percent to $1,272.71 per ounce after hitting its strongest since Nov. 10 at 1,279.80 earlier in the session.

U.S. gold futures for June delivery rose $3.90 to settle at $1,278.31 after hitting $1,281.80 earlier in the session, the highest level since Nov. 10.

"The short term geopolitical impact will likely fade but( gold) was oversold on expectations of rate hikes and the reality of muted rate hikes sets up the potential for (further) upside," said Hamza Khan, head of commodities strategy at ING.

Gold tends to gain when rate hike expectations recede because lower rates reduce the opportunity cost of holding non-yielding bullion.

The dollar was flat versus a currency basket after falling on Tuesday, though a general risk-off mood that has prompted investors to sell the greenback prevailed. Chinese President Xi Jinping on Wednesday stressed the need for a peaceful solution for the Korean peninsula on a call with U.S President Donald Trump.

On Tuesday North Korea warned of a nuclear attack on the United States at any sign of American aggression, as a U.S. Navy strike group steamed towards the western Pacific.

Elsewhere, Vladimir Putin said on Wednesday trust had eroded between the United States and Russia, as Moscow delivered an unusually hostile reception to U.S. Secretary of State Rex Tillerson in a face-off over Syria.

In France's presidential race, centrist Emmanuel Macron and far-right leader Marine Le Pen clung on as frontrunners, but a far-left veteran has surged into the top four, pushing some pollsters to calculate the most extreme run-off scenarios.

Gold could resume its rise ahead of the Easter long-weekend, Jeffrey Halley, senior market analyst at OANDA, said.

"Gold has finally broken and closed above its 200-day moving average at $1,257.50, which now becomes a support. From a technical perspective, the way is now clear for a run at $1,300 and possibly higher," Halley said.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund (ETF), rose 0.50 percent to 842.41 tons on Tuesday. The ETF has seen about six tons of inflows this week.

Among other precious metals, dipped 0.22 at $18.26 an ounce.

fell 0.48 percent to $962.40 per ounce after rising over 3 percent in the previous session, while dropped 0.69 percent to $796.50.