By Clara Denina
LONDON (Reuters) - Gold steadied below a two-month high on Monday as global shares inched lower and the Iraq crisis intensified, supporting the metal's appeal as a hedge against risk.
Sunni tribes took control of a border crossing between Iraq and Jordan late on Sunday after Iraq's army pulled out of the area following a clash with rebels, Iraqi and Jordanian intelligence sources said.
Spot gold was up 0.1 percent at $1,315.95 an ounce by 1424 GMT. The metal posted its biggest weekly gain in three months last week to a two-month high of $1,321.90 in the previous session.
U.S. gold futures for August delivery were flat at $1,316.40 an ounce.
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"Gold's rally to 2-month highs is overdone... but people are not really taking profits because of the uncertainty surrounding the situation in Iraq," VTB Capital analyst Andrey Kryuchenkov said. "It's general risk aversion that is helping the metal."
Gold was supported above $1,300 an ounce by weaker global stocks after euro zone business activity data showed growth slowing, while the dollar remained under pressure against a basket of currencies despite U.S. data showing stronger-than-expected existing home sales for May.
"In stock markets, we had a new record high last week but we are seeing a bit of a wobble today ...and any further weakness could lend further support but not enough to justify another rally," Saxo Bank senior manager Ole Hansen said.
Investors tend to seek refuge into safe havens like gold from riskier assets in times of geopolitical or financial troubles, while a weaker dollar makes the dollar-denominated metal less expensive for foreign investors.
Hedge funds and money managers increased their bullish bets in gold futures and options in the week to June 17 as bullion prices climbed, according to data from the Commodity Futures Trading Commission on Friday.
With the higher prices, physical demand from top consumers China and India has been slow to pick up.
Traders said physical demand across Asia has been subdued as many expect gold prices to fall further.
Demand is also being hurt by large purchases last year, when gold prices fell 28 percent, and earlier this year.
"There is underlying support from the geopolitical tensions in the Middle East, but with Wall Street near record highs, risk appetite looks strong and that is hurting gold," said a precious metals trader in Hong Kong.
"Without strong demand either from the physical markets or from exchange-traded funds, the gold rally is not going to last."
PLATINUM, PALLADIUM FALL
Platinum and palladium dropped by around one percent to session lows after South Africa's striking AMCU mining union on Monday met its members to discuss the latest offer from Anglo American Platinum, Impala Platinum and Lonmin aimed at ending the country's longest and costliest strike.
Lonmin said it expects to receive feedback from the union after the meeting is concluded.
Platinum fell 1 percent to $1,442.40 an ounce, while palladium dropped 0.6 percent to $812.00 an ounce.
Silver was unchanged at $20.85 an ounce after jumping 6.3 percent last week, its biggest gain since February.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy and Pravin Char)
