By Nithin ThomasPrasad
BENGALURU (Reuters) - Gold prices on Monday held around their highest in nearly seven weeks as tensions on the Korean peninsula boosted safe-haven demand for the metal and as the U.S. dollar hovered close to multi-month lows.
The United States flew two supersonic B-1B bombers over the Korean peninsula in a show of force on Sunday and the U.S. ambassador to the United Nations said China, Japan and South Korea needed to do more after Pyongyang's latest missile tests.
"I think (the market) is cautious about the situation in North Korea and investors tend to go long on gold (at times like these)," said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank. "I think gold will stay firm this week."
Spot gold hit its highest since June 14 at $1,270.98 in early trade, but was down 0.1 percent at $1,267.93 per ounce as of 0656 GMT. It gained about 1.1 percent last week in its third consecutive weekly gain.
U.S. gold futures for August delivery fell 0.1 percent to $1,267.60 per ounce.
"Due to the ongoing summer holidays (in Asia), markets are expected to be thin and quiet," said ICBC Standard Bank's Ikemizu.
The dollar struggled on Monday, wallowing near a 2-1/2-year low against the euro, weighed down by U.S. political uncertainty and uninspiring U.S. data that added to doubts about whether there will be another Federal Reserve rate hike this year.
"A weaker U.S. dollar is the main driver of gold's price action," said Jeffrey Halley, a senior market analyst at OANDA.
"However, deepening political turmoil in Washington ... and North Korea's progress on ballistic missiles will all ensure the uncertainty premium continues to support gold's price."
Meanwhile, gold prices in India last week recorded the biggest discount in seven months as a rebound in prices curtailed retail demand, while lower premiums in other Asian centres failed to lure customers amid a seasonal slowdown.
Hedge funds and money managers sharply increased their net long position in COMEX gold to a four-week high in the week to July 25, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.
Spot gold may break resistance at $1,271 per ounce and rise towards the next resistance level at $1,277, driven by a strong wave C, according to Reuters technical analyst Wang Tao.
In other precious metals, silver prices gained 0.3 percent to $16.71 per ounce. The metal rose 1.2 percent last week, in its third straight weekly gain.
Platinum climbed 0.7 percent to $935.25 per ounce, after falling about 0.5 percent last week. Palladium advanced 1.1 percent to $886.72 per ounce, having gained 3.8 percent the previous week.
(Reporting by Nithin Prasad in Bengaluru; Editing by Joseph Radford and Subhranshu Sahu)
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