A three-day ceasefire came into effect between Israel and the Palestinians in Gaza at 21:00 GMT last night, after a day of intense diplomacy in Egypt.
Last Friday, the gold traded as high as $1323 following the news that U.S. President Barack Obama authorized air strikes against militants in Iraq but came under heavy selling pressure in early NY trade as Russia's Defence Ministry said it had finished military exercises in southern Russia, which the United States had criticised as a "provocative" step amid the Ukraine crisis.
The Dow surged some 185 points on Friday, although the gain in the S&P-500 was far more muted. The reduced tensions also helped pare back some of the earlier gains seen in oil prices.
“While it appears as though concerns are fading, as long as geopolitical risks still exist in the background, gold will continue to be supported,” said Zhu Siquan, an analyst at GF Futures Co. from Guangzhou, China. “We’ll get some buying on headlines but we’re not going to see large investor interest.”
The physical gold Holdings of the giant gold ETF, the SPDR Gold Trust fell 0.2 percent to 795.86 metric tons on Aug. 8. For the week, the holdings contracted 0.8 percent, the most since the period to May 2, and erasing this year’s gain.
Speculative traders last week cut their overall bullish position – net of bearish bets – down 12.5% from the previous week, for the 2nd week running to a notional 448 tonnes of gold bullion, new data from US regulator the CFTC showed after Friday’s close.
Overall, the total number of gold futures and options contracts now open fell further from last week's 5-year low.
Economic data this week may sway gold’s direction, market watchers said. It’s a heavy week, with key reports slated for release from China, Europe and the U.S.
Over the weekend, China’s consumer price index (CPI) rose by 2.3pc year-on-year in July, beating the 3.5pc target set by the government.
Wednesday brings U.S. retail sales. Eurozone, French and German gross domestic product data is due Thursday and the New York Federal Reserve’s Empire State index is scheduled for Friday.