Gold prices rose on Thursday as the dollar retreated after data showed subdued price pressures in the United States, while rising security concerns created by tensions on the Korean peninsula supported sentiment.
The dollar slipped on news that annual inflation rose at its slowest pace since late 2015, which diminished expectations of a Fed rate rise in December. A falling U.S. currency -- already near its lowest since 2015 -- makes dollar-denominated gold cheaper for holders of other currencies, which could boost demand.
Spot gold was up 0.8 percent at $1,319.31 an ounce, on track for a rise around 3 percent this month. U.S. gold futures for December delivery settled up 0.6 percent at $1,322.20.
Gold prices are up around 13 percent so far this year. Some of that gain came after North Korea fired a missile over Japan. That was followed two days later by South Korea's air force conducting an exercise with two U.S. nuclear-capable bombers above the Korean peninsula on Thursday.
"The situation in Korea encouraged interest in gold and the weaker dollar has lifted gold," Oxford Economics commodities analyst Dan Smith said. "We don't know what's going to happen with geopolitics, but we seem to be in a fairly stable environment in terms of the macro picture, which should mean limited upside for gold."
Oxford Economics expects the gold price to average $1,265 in the fourth quarter and $1,270 next year. This week, the Fed's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, showed a 0.9 percent rise in the second quarter, its slowest in more than two years.
Holdings of gold in physically-backed exchange traded funds jumped to 54.176 million ounces on Monday, up more than two percent since Aug. 9, but the last couple of days has seen investors sell, albeit small amounts.
On the technical front, attempts to break towards Monday's 9-1/2 month high above $1,325 face resistance at $1,312, the upper Bollinger band. Support at $1,300 is reinforced by a Fibonacci retracement level at $1,297.
"The North Korean missile test ... helped gold burst decisively through $1,300 an ounce triple-top resistance, INTL FCStone analyst Edward Meir said. "It will be interesting to see if further chart-based buying materialises now that this triple-top has been breached, especially on any dips."
Elsewhere, silver rose 1.03 percent to $17.559 an ounce, platinum was 1.07 percent higher to $997.10 and palladium added 1.02 percent to $936.50.