Gold slips from near seven-year high amid US-Iran tensions

Gold prices retreated on Tuesday from near seven-year highs reached in the previous session as investors took profits in the absence of new developments in the tense situation between the United States and Iran.

Deficit-hit palladium meanwhile hit another record peak on the back of prolonged supply constraints in the market. Spot gold was down 0.1% at $1,564.31 per ounce as of 1257 GMT, having fallen as much as 0.7% earlier in the session. It touched its highest since April 2013 at $1,582.59 on Monday. US gold futures were 0.2% lower at $1,566.00.

"There is nothing fundamental going on here, it is just a reaction to yesterday`s price movement. Investors are looking at the other side of the coin and taking some profits," ABN Amro analyst Georgette Boele said. The market seems a little more relaxed about the situation in the Middle East, she added.

Prices surged on worries about an armed conflict between the United States and Iran after a US-authorised drone strike killed a top Iranian military official on Friday. With both sides exchanging threats of retaliation, a senior Tehran official said on Tuesday Iran had been considering 13 "revenge scenarios" in retaliation to the air strike.

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"We are far from out of the woods yet, and any signs of hopes for an easing in tensions would be premature,"Commerzbank analyst Carsten Fritsch said. Washington`s decision to deny a visa to Iranian Foreign Minister Mohammad Javad Zarif had added to concerns, he said. Zarif was expected to arrive in New York for a United Nations Security Council meeting on Thursday.

"The fact that gold hasn`t reacted to this news is a signal that the market has already positioned (itself). People are long (on gold), so I would expect some kind of correction unless you really see an escalation," ABN`s Boele said.

Other safe-haven investments, such as the Japanese yen and Swiss franc, also pulled back after posting some solid gains in the previous two sessions. Elsewhere spot palladium rose 0.6% to $2,042 an ounce, having touched an all-time peak of $2,047.24 earlier in the session.

The surge in palladium prices is predominantly due to speculative buying, and the "higher the prices go, the sharper the correction will be", Commerzbank`s Fritsch said.
Silver slipped 0.6 % to $18.03 an ounce, after touching a more than three-month high of $18.50 in the previous session, while platinum advanced 0.6% to $968.50.