GOLD PRICES retreated on Thursday morning in London while the Dollar recovered on positive economic data from the United States and China and investors extended stock market gains, writes Steffen Grosshauser at BullionVault.

The US Dollar regained ground after the US second-quarter gross domestic product grew by 3.0% - its quickest pace in more than two years.

Furthermore, 237,000 workers were hired in the US in August, compared with an expectation of a 185,000 rise, which was the biggest increase in 5 months, according to the ADP National Employment data that was released 2 days before the official non-farm payroll report.

"Gold will be somewhat at the mercy of random month-end US dollar flows today, with the technical picture still constructive as long as the $1284 support holds," said Jeffrey Halley, senior market analyst at currency data provider Oanda.

While Asian and European stock markets advanced, gold declined to $1306 per ounce from the 9-month high at $1325 reached after North Korea fired a missile over Japan on Tuesday. But the yellow metal managed to hold above the key $1300 level, capping losses whilst heading for a 3% monthly gain, as geopolitical tensions between the US President Donald Trump's government and North Korea remain.

"Talking is not an answer," Trump tweeted about the standoff with North Korea. US Defensive Secretary James Mattis, however, sent a different signal by reassuring that a diplomatic solution remains on the table. Russia also warned the US that taking military action against the regime in Pyongyang could lead to "unpredictable consequences".

"Barring a quick resolution to the current stalemate, gold could remain buoyed above $1300 per ounce for some time," said Singapore-listed OCBC Bank in a note, revising its year-end outlook for gold from $1200 to $1250.

"[However,] given that the rhetoric coming from Japan and the US to date has been tempered, prices could drift lower," countered Cameron Alexander, analyst at the precious metals consultancy Thomson Reuters GFMS.

Support comes in at $1297 per ounce, the 23.6% Fibo retracement level of the recent 8-week rally, said Canada-based investment bank and bullion clearer Scotiabank's technical analysts in yesterday's note.

In other precious metals, silver and platinum remained steady around $17.40 and $990 respectively, while palladium was up 0.8% to $940 per ounce.

Global fuel prices, meanwhile, jumped as hurricane "Harvey" continued to batter the energy-rich Gulf of Mexico with around 23% of US refinery capacity, which raised concerns over fuel shortages ahead of the US Labor Day.

Over the next few weeks, the markets will closely monitor the looming US debt crisis as its government will need to raise the debt ceiling before the end of September to avoid running out of cash.